Categorising investment consumers

Controllers, externalisers and worriers: which type of customer are you dealing with?

By Craig Phillips 

A well known old adage states that men never stop to ask for directions when they’re driving. In fact, some men and women find it very difficult to take advice in relation to a whole range of day-to-day interactions.

In financial services, research by brandmanagement has identified a segment of consumers who can be extremely frustrating for institutions to deal with.

The conundrum for banks and investment groups is this: a significant number of individuals in Australia have become successful and affluent partly due to inherent traits that make them inclined to seek ‘control’ of their surroundings.

Examples are:

• A workaholic who refuses to delegate tasks.
• An investor who reads the minute detail of a product disclosure statement before calling customer service staff with endless queries.
• A self-funded retiree who regularly ‘drops-in’ to talk with a representative at an institution to grill them on the benefits of an upcoming share float.
• A manager who micro-manages every stage of a given process.
• A multi-tasking parent who makes unreasonable demands on their investment adviser as they save to fund their children’s education.

As diverse as this group is, brandmanagement refers to these individuals as controllers.

They tend to be well educated, sure of themselves, and in many cases extremely wealthy. The flip side of this is that controllers often trust their gut-feeling and believe they know better.

Controllers build up their levels of understanding on a given subject, using up vital institutional resources in the process, before taking this new found knowledge and acting on it themselves.

This collective is not a group most investment advice-based businesses want to have on their books. Controllers have a tendency to draw out information from groups where knowledge gaps exist, before taking that knowledge and putting it into practice through their own means.

Controller-type investors are most likely to be male, are usually tertiary educated, make information-based decisions and usually manifest as “type A” personalities – driven, aggressive, high achievers.

The much more attractive segments banks and investment groups want on their books are the groups referred to as ‘externalisers’ and ‘worriers’.

Externalisers, as the name suggests, tend to demonstrate the fact they have money through material manifestations. The benefit of this group as clients is they are not uncomfortable in paying for the various services offered by banks and investment groups.

Externalisers are happy to go about their day-to-day business while letting professionals take care of their finances. 

Meanwhile worriers are those people who are never entirely happy with what they have or secure with their lot in life.

This group has slightly more females compared to the natural distribution of the population. Externalisers enjoy investing and like to earn money, but seek to delegate decision making and to do so in a passive environment. This group has a lower risk tolerance than other segments.

Controllers
Controllers are more likely to hold the highest levels of investment knowledge and experience.

They are investment enthusiasts and demonstrate a high level of planning for the future (78 per cent say that investing is very important). Money does not represent their achievement and they have a lower requirement for status through money.

They have low money anxiety: that is, they don’t worry about money, don’t find it difficult to make decisions about money and don’t worry they will be left short in retirement.

58 per cent of direct investors (those who don’t use intermediaries to make investment decisions) are derived from this group.

Externalisers
Externalisers tend to have lower levels of investment knowledge and experience and are less likely to make financial plans for the future, yet are still relatively expert compared to the broader population.

Money is a score of achievement. They score the highest on spending to get the very best and money represents part of their achievement in life. They tend to be high income earners and feel secure when they have a secure job.

Many are time poor and use independent financial planners, stockbrokers, friends and family, and media as sources of investment advice.

Brand is important to them – they need to claim you as a specialist and ally and to feel empowered by choosing you.

Worriers
Worriers classify themselves as having lower levels of investment knowledge and experience. They are less inclined to make financial plans for the future and are most inclined to worry about not having enough money in retirement. Only 53 per cent think that investing is very important. There are more women in this group and they are, on average, older than the other two groups.

Worriers often have difficulty in making investment decisions and have higher usage of financial planners and media information sources.

Craig Phillips is head of market intelligence with financial services research group brandmanagement