Customer profiling

economic-dictionary

Client profiling consists of identifying the characteristics of a client for adequate financial advice on their investments and, on the other hand, so that both the financial and vital objectives of the client are met.

In recent years we have been able to observe a rapid growth in terms of financial literacy on the part of the world population. The increasingly demanding world of the financial sector and financial markets is causing many people to inform themselves and invest time and money to manage their investments, work and know the reason for the recent financial crisis.

As can be seen in the Inverco graph, the financial savings of Spanish families was modified from 1995 and 2000 to 2014.Following many privatizations of the public sector, listing of many private companies, and the high returns offered by equity markets, money flows have changed over the years.

Investment in shares (identified with the red color - direct investment-), has been increasing notably, to which investment funds have also been added (the yellow color -Institutions of Collective Investment-).

Profile of a client when investing

The correct advice of a client is crucial, that is why the following points must be very clear to identify the type of client (conservative, moderate or aggressive) and their future needs.

A multitude of variables must be taken into account, such as your previous experience in financial markets, the time horizon of the investment or the importance of the objective to be achieved, among others.

  • Profitability requirements: The client's investment objective must be taken into account. It is not the same to invest the savings for the first home than to do it for retirement. In this case, a profitability objective must be set that is consistent with the situation of the financial markets and with the client's objectives. To do this, it must be taken into account if the client wants to have a continuous income in the short term (once invested, the client is reimbursing amounts of money -such as a salary-) or, failing that, he wants to grow his capital in the long term.
  • Risk tolerance or aversion: In this case, the maximum loss willing to bear must be taken into account. That is, the loss of purchasing power. Also, the maximum volatility of returns (the risk to be assumed) must be taken into account. As a guideline summary, the following financial assets serve as a guide:
  • Liquidity requirements: At this point, it is necessary to know exactly what liquidity needs the client will have in the short, medium and long term. It directly depends on the future needs of the money invested.
  • Investment horizon: The investment term must coincide with the investment recommendation that the commercial departments specify in the fund files. Typically, there is a wide range of mutual funds that invest in different assets for different terms. It is therefore important to know the term in which certain returns are expected to be obtained.
  • Legal Considerations: Sometimes forgotten by many investors. Not buying arms, tobacco companies or companies that invest in certain countries can be examples of legal or specific restrictions that the client may have.
  • Tax considerations: The economic-financial profitability is crucial to carry out a complete advice. On many occasions, fiscal reforms are coming that can determine for better or for worse the return obtained. The client's tax obligations must also be taken into account, or even if it pays to realize the capital gains before or after the tax year.

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