How To Segment Today's Investors

It's been more than three years since we did our last investor segmentation -- and oh, how times have changed. The search for the best way to discriminate between today's investors led us to two key distinctions: relative wealth and self-directedness. These two dimensions combined yield nine investor segments with distinct traits -- segments like Wealthy Delegators, who are most likely to have purchased multiple products from a single provider.

Predicting what and where investors will buy

Our segmentation uses no technology or online preference questions -- yet it's uncanny in predicting technology behaviors like online trading (see the figure to the right).

Broker-dealers and mutual fund families can use our segmentation to improve sales and service to the customers they already have. But advisors will benefit, too: Our research shows that advisors who help clients look at their accounts online earn more revenue and feel more trusted by their clients.

Where are investors putting new money?

Investors are generally sticking with stocks, and the investments likely to grow fastest this year are 529 plans. Few investors have 529s today, but 40% of them plan to add to their accounts this year. And they cut an attractive profile: In terms of age, income, and products owned, 529 plan investors have much in common with the next wave of millionaires.

What makes today's millionaires feel satisfied?

Our data shows that 80% of today's wealthiest investors are online at least once a month. So it's no surprise that when we tested for the attributes that best predict millionaires' satisfaction with their brokerage firms, "advanced use of technology" came in second from the top.

What's the strongest predictor of millionaires' satisfaction? Customer advocacy -- the perception that their firm offers products and services that are best for the customer, not just the firm's bottom line (see the figure below).

All of which makes this a particularly bad time for firms like Morgan Stanley to be accused by regulators of putting their own interests before customers'. To avert client backlash, we recommend that Morgan Stanley deliver written agreements to customers and fix its client-facing technology.

Tired of reading? Watch the video

Our data continues to reinforce the importance of customer advocacy to financial services consumers. We laid out the case in July in "Winning The Changing Financial Consumer." We've also cut a three-minute VideoView of report highlights. View the video here.

Got feedback?

As always, we're eager to hear from you. Do you have topics to recommend, data you need, or technologies you want assessed? Drop me a line with your input at billdoyle@forrester.com.


Bill Doyle
Financial Services Research Director

EMAIL: Email this issue to a colleague.

PRINT: View a printer-friendly version of this issue.

VIEW ARCHIVE: View past issues of First Look.

TECHNICAL SUPPORT: Call the Client Resource Center
1 866/FORRESTER (1 866/367-7378) or +1 617/613-5730

UNSUBSCRIBE: We hope you like First Look. But if you want to unsubscribe, please go to our email subscriptions page.