Markets & Strategies

What Type of Investor Are You?

Understand your preferences and you can improve your investment experience.

by Michelle Crouch - May 01, 2018

You already know if you’re a saver or a spender, but do you know what type of investor you are? There’s no right or wrong, better or best trait when it comes to your investment preferences. You might be surprised to learn many industry leaders find themselves delegating management of their investments entirely with a financial advisor.

“Understanding your natural tendencies as an investor, or even your preferences for how to make investment decisions, may help you make sound and balanced financial choices and get the most from your relationships with investment professionals,” says Bradley Bevington, Vice President and Program Manager of The Client Preference Model for Wells Fargo Advisors.

Delivery of investment advice is not one-size-fits-all. Clients oscillate on a spectrum of communication and engagement styles, Bevington says. “First begin by understanding your own preferences, and then share that understanding with your partner or spouse if you have one, and your financial team. Once your advisor knows your traits, they can deliver a customized experience tailored to your depth of knowledge, how you like to receive information, and how you prefer to work with your financial advisor.”

Here, we’ll focus on four common types of investor traits — and what you need to know to help improve your investment experience if you find yourself aligning with one of these styles.

trusted relationship traits
  • You have a strong, personal relationship with your advisor, and/or high confidence in the expertise behind managed investment products; you want your advisor or the investment managers to drive the decision-making.
  • You’re less interested in the intricate details of your portfolio or its day-to-day management.
  • You prefer to delegate your financial affairs to a professional or to select investment types that have built-in management features, because you don’t have either the time or the inclination to delve deeply into financial matters.

If this sounds like you: To help ensure you’re on track to reach your financial goals, Bevington says, “You may only want to meet with your advisor or check on your portfolio by other means a few times a year.” Tell your advisor to update you, at your preferred frequency, but ask them to present simplified views of your plan — even if it’s complex.

collaborative traits
  • You have a high level of knowledge and interest in the financial industry, and you enjoy making investment and financial decisions. However, you don’t want to go it alone.
  • You value guidance and advice from an experienced professional.
  • You want your team to present investment recommendations that outline the features, benefits, and risks associated with several choices, but allow you to make the final decision.

If this sounds like you: Bevington recommends connecting with your advisor prior to any face-to-face meetings. Share new topics you want to discuss and ask them to send out relevant reports in advance so you have time to review them. This allows time to complete your own research so you have a richer, more valuable dialogue with your advisor.

Don’t work one-on-one with an advisor but you’re collaborative? You can still create a virtual collaboration network by blending self-study, digital tools, and research with insight from other collaborative investors through a variety of online resources.

multi-institution/risk-averse traits
  • You are a committed saver and investor, but have accounts with multiple financial services institutions.
  • You see diversification of investments as a way to reduce risk.
  • Your principal concerns are security and stability of capital preservation.

If this sounds like you: It’s important to discuss all of your assets with your advisor, even those held elsewhere, Bevington says. With this information, your advisor can create an accurate investment plan and give you a full view of your financial picture.

If your goal is stability, it’s essential to understand how all of your assets are allocated. Don’t confuse distributing your assets for diversification, he says. “Having that full picture allows your advisor to create an appropriate allocation in the accounts they manage while providing additional security toward achieving your long-term financial goals.”

independent traits
  • You pour over research, study financial reports, and enjoy spending time on financial matters.
  • You like to make financial and investment decisions on your own.

If this sounds like you: Look for digital tools, such as the Wells Fargo Mutual Fund Screener, that can help you do research and look directly at your investments on your own or between meetings with an advisor. “Remember that an advisor can help you with access and guidance in a variety of other financial products such as lending, estate planning, and insurance as needs arise,” Bevington says. An advisor can also provide high-level advice, help you with complex decisions, and periodically evaluate your portfolio to ensure alignment with your investment objective.

It’s not unusual for your preferences to change over time, just like your investment objective could shift as you approach retirement. Don’t shy away from discussing changes in your preferences. Bevington concludes: “In our relationships it’s not about how an advisor wants to work with you, it’s about how you prefer to work with your advisor.”

Michelle Crouch writes about consumer finance, parenting, and more from her home in Charlotte, North Carolina. Her work has appeared in Reader's Digest, Parents magazine, and The New York Times.

Image by iStock

Additional Resources

A mutual fund screener is an easy-to-use tool to help you find the right fund for your portfolio’s needs. Learn more.

Balancing debt repayment with your investing goals takes strategy and planning. Get insights from Wells Fargo Advisors.