Abstract
In Canada, financial advisors and dealers are required by provincial securities commissions and self-regulatory organizations--charged with direct regulation over investment dealers and mutual fund dealers--to respectively collect and maintain Know Your Client (KYC) information, such as their age or risk tolerance, for investor accounts. With this information, investors, under their advisor's guidance, make decisions on their investments which are presumed to be beneficial to their investment goals. Our unique dataset is provided by a financial investment dealer with over 50,000 accounts for over 23,000 clients. We use a modified behavioural finance recency, frequency, monetary model for engineering features that quantify investor behaviours, and machine learning clustering algorithms to find groups of investors that behave similarly. We show that the KYC information collected does not explain client behaviours, whereas trade and transaction frequency and volume are most informative. We believe the results shown herein encourage financial regulators and advisors to use more advanced metrics to better understand and predict investor behaviours.
Highlights
Investors hire financial advisors to help them select, facilitate, and manage their investment choices
We focus on trading behavior, with investigations of portfolio construction, asset mix, and risk and returns left to future work
This paper studies the know your client (KYC) obligation that requires financial advisors and dealers to conduct due diligence on clients and take “reasonable steps” to establish such things as their identity, creditworthiness, investment needs, financial objectives, and risk tolerance
Summary
Provided in Cooperation with: MDPI – Multidisciplinary Digital Publishing Institute, Basel. Mark; Grace, Chuck (2021) : Know your clients' behaviours: A cluster analysis of financial transactions, Journal of. Risk and Financial Management, ISSN 1911-8074, MDPI, Basel, Vol 14, Iss. 2, pp. Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen. Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
