New Report from DataPoints Gives Advisors Insights to Achieve Greater Alpha for Clients

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By understanding investing attitudes, advisors can pinpoint where to provide additional guidance and education to achieve greater “advisor alpha” for clients.

Advisors can proactively guide each member of a household to achieve financial success with behavioral assessments.

Behavioral assessments can pinpoint which clients will benefit from additional guidance and advice when it comes to investing.

DataPoints released its first quarterly client financial psychology report brief, the Client FinPsych Report. This quarter’s report focuses on the investing-related attitudes of nearly 1,600 financial planning clients spanning over 140 financial planning firms in the United States. The report examines client attitudes related to long-term investment strategies as well as short-term actions such as following minute-to-minute market news.

“Many clients embrace long-term investing strategies such as ignoring daily market fluctuations. For those clients who embrace more of a short-term attitude about investing, our research highlights areas where advisors can provide guidance,” reported Sarah Stanley Fallaw, Ph.D., founder and President of DataPoints. “Particularly for those clients who are not primarily responsible for investing-related decisions in the household, 65% of whom are women, there is an opportunity for advisors to educate and ultimately to empower all investors to achieve success.”

The research brief, based on a sub-sample of data from the FinPsych Database from DataPoints, highlights critical areas where advisors can provide advice, education, and communication to clients concerning investing behaviors, thereby improving the likelihood of achieving so-called “advisor alpha,” a term referring to the outperformance relative to a benchmark as a result of working with the advisor.

Some of the findings from the report include the following:

  • More than three-quarters of clients (77%) agree that most investors should ignore daily market fluctuations. Stated another way, 23% of clients are neutral/unsure or agree that investors should monitor daily fluctuations.
  • Over 70% of clients (71%) disagreed with the idea that focusing on short-term gains is important. Nearly 30% of clients (29%) were either neutral or agreed that short-term gain is important in investing.
  • Nearly 60% of clients (58%) agree that a “slow and steady” investing strategy leads to building wealth.
  • More than half of financial planning clients (53%) reported agreeing or being neutral when asked if investors can beat the market if it is studied.
  • Less than half of clients who report being primarily responsible for investing-related decisions are women (43%). Of clients who report that their spouse is primarily responsible for investing-related decisions, 65% of them are women.
  • Attitudes differed depending on the client’s role in making investment decisions in the household. While 85% of clients who report being responsible for investment decisions in the household agree that most should ignore market fluctuations, only 63% of clients who report the spouse is responsible agree with the statement.

“A client’s investing mindset and subsequent decisions can make or break even the best financial plan. Advisors who tailor their services and guidance based on a client’s unique personality have an advantage in helping them to avoid behavioral pitfalls and achieve long-term investing success,” said Dr. Fallaw. “Advisors who implement behavioral assessments from DataPoints have ongoing access to the unique attitudes of their clients so that they can proactively guide them to make sound investing decisions.”

The DataPoints Q1 2021 Client FinPsych Report is available for download here.

About DataPoints

At DataPoints, we know client mindset impacts spending, saving, and investing decisions. We've created a suite of tools for financial professionals to identify financial personality so that clients avoid behavioral pitfalls and achieve financial success. Our financial psychology solutions are based on more than 40 years of behavioral, consumer, and demographic data that shaped the best-selling book, The Millionaire Next Door. Learn more about DataPoints here.

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Amber DeGan
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