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Is Your Client Looking for a Leader?

Follower-type clients may follow the lead of friends, colleagues, or fads without regard to a long-term plan.

Michael M. Pompian, 05/15/2014

This month's article is the fifth in a series called "Deep Dives into Behavioral Investor Types." This series is intended to help advisors create better relationships with their clients by deeply understanding the type of person they are dealing with from a financial perspective and adjusting their advisory approach to each type of client.

As we learned in the last series, there are four behavioral investor types (BITs): the Preserver, the Follower, the Independent, and the Accumulator. If you missed any of these articles, you can find them in my article archive on MorningstarAdvisor.com.

In this series, I am covering each BIT in three parts:

--Part I will be a diagnosis of each BIT and discussion of its general characteristics 
--Part II will be a deep dive into the biases of each BIT. 
--Part III will be how to create a portfolio for each BIT. 

This article is the first part for the Follower BIT.

Diagnosing the Follower BIT
I am often asked how to diagnose what category of investor a client falls into. The following is a helpful way to initially identify an investor type. I have highlighted in bold below the responses that identify the Follower BIT. 

BIT Orientation Quiz

1. My main role in managing my money is:
a. To be the guardian of my wealth by not making risky investments.
b. Actively trading my account to accumulate wealth.
c. Doing research before investment decisions.
d. Listening to others for advice on managing money.

The author is a freelance contributor to MorningstarAdvisor.com. The views expressed in this article may or may not reflect the views of Morningstar.

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