Columbia University in the City of New York



Advisers Mine Clients' Personality Types

Emotional Responses, Rather Than Assets, Affect Service and Marketing to the Wealthy

By SCOTT STEARNS

June 24, 2006; Page B4

Are you a thrillionaire or a willionaire?

In hot pursuit of the affluent, more financial advisers are focusing on the passions and motivations of their clients, rather than just the size of their wallets. For these advisers, it no longer suffices merely to know clients' favorite sports teams and the ages of their children. They want to know how a client's mind works -- and they are using a host of new "psychographic" tools to help them figure that out.

JPMorgan Asset Management, a unit of J.P. Morgan Chase & Co., recently hired a New York-based cultural anthropologist to research what makes the affluent tick. The study, released to advisers in March, found that wealthy people generally fall into one of five categories, including "thrillionaires," who see their money as a means to splurge on fabulous objects and experiences, and "willionaires," who feel wealth brings a responsibility to improve the world and who are most likely to see their name carved into the side of a building.

This kind of research influences the way retailers decorate stores and the kinds of homes real-estate developers build in planned communities. Pharmaceutical companies use it to target sales pitches to physicians.

For advisers, it provides a framework for working with clients -- and selling them new products and services. An adviser might pitch a conservative asset allocation as "innovative and customized" to a thrillionaire client, said Susan Hirshman, a wealth strategist and managing director at JPMorgan. Drone on about "conservative investing," and that investor might flee to another adviser who better understands what pushes the investor's buttons. Similarly, a meeting at the fanciest restaurant in town might lead the "realionaire" client (thrifty, "Millionaire Next Door" types) to wonder if the adviser is charging too much.

It is all a far cry from the days when commission-based brokers could get by with just enough client information to confirm the suitability of stock and bond trades. Advisers today are embracing a more holistic approach to financial planning, putting their ability to understand the client's needs at the center of the business.

But while systems that divide the wealthy demographic into personality types aren't new, they are far from standard fare in the financial-advice business. Most advisers still use quantitative measures like assets under management to distinguish among their clients and provide more perks and services to the wealthier ones. "Other industries put our industry to shame in terms of the amount of market research they do," says Patricia J. Abram, senior managing principal with financial-services research firm CEG Worldwide LLC.

John Nersesian, a managing director at Nuveen Investments Inc. who consults with financial advisers on wealth management and practice development, says clients' No. 1 complaint is that advisers see them only in terms of their finances. He recommends that they engage clients in a well-conceived "discovery process" -- a series of questions meant to elicit emotional responses -- rather than simply looking at them in terms of assets.

Peter L. Chamberlain is one adviser using a psychographic approach in his practice. As president of B.R. Chamberlain & Sons Inc., an Orlando, Fla., advisory firm with $250 million under management, Dr. Chamberlain has discovered he works best with the "family steward" type -- a person whose prime concern is family well being and a smooth transfer of wealth from one generation to the next. He presents investment results in terms of progress in meeting goals like college funding, rather than focusing strictly on dry percentage returns.

Ms. Abram of CEG Worldwide, which provides coaching to advisers targeting the high-net-worth market, said this approach to segmentation affects client service and marketing in "subtle but important" ways, and can influence everything from the content of an advisory firm's Web site to the wording of thank-you letters.

For instance, a type of client sometimes called the "financial phobic" is confused and frightened by dense numerical detail and is best served with brief, nontechnical financial reports and conversation from the adviser. The "gambler" client, on the other hand, wants lots of information and likes hearing about innovative investment products, like new flavors of exchange-traded funds.

"As more advisers adopt a wealth-management business model, this needs to be part of that," says Ms. Abram. "The wealth manager is required to be a specialist and to have a much more finely honed value proposition."

Some advisers are using this approach for prospecting. One adviser, recognizing that he works best with high-living thrillionaires, joined an exclusive, upscale cigar bar where he now gets most of his new business.

Dr. Chamberlain says that psychographics not only help him serve clients better but also led him to shed about 10% of his business after he realized some of his clients fell into categories -- like "gamblers" -- that weren't compatible with his practice.

Thomas Rabaut, president of Fidelity Group, an independent firm in Troy, Mich., has gone even further. He recently decided to shed nearly half of his firm's 300 clients as part of a broad shift to a wealth-management model and is ditching clients whose "high-net-worth personalities" don't fit the kind of practice he wants to have. Other considerations include whether clients fit the demographic niches he is now targeting (such as affluent college professors and auto-industry executives), their effectiveness as a referral source and their degree of wealth.

Mr. Rabaut says his average client now has more than $1 million in assets under management, compared with $162,000 when he started moving toward wealth management about a year ago.

Write to Scott Stearns at scott.stearns@

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