Administering Personality Tests in Financial Planning: Best Practices


A personality test can efficiently measure a client’s money-related attitudes, values, and other characteristics. While not a perfect science, a well-developed test can accurately assess a client’s personality without some downsides of in-person interviews, which can take time and be impacted by interviewers’ biases or lack of structure. 

But like any assessment, personality tests are prone to some errors. These errors could include how clients respond to a test based on wanting to look their best or their perception of what the advisor wants from them. Both can lead to inaccuracy in a client’s scores, making them, at best, slightly higher or lower than their “true” score, and at worst, can leave the client and the advisor with a completely inaccurate view of the client’s personality. 

In-Person Testing: Demanding the Wrong Thing From Clients

Shifting gears for a moment, let’s consider how behavioral scientists conduct research. One of the problems with laboratory studies, where participants are invited or opt-in to an experiment, is that the researcher can potentially influence the study results. For example, think about the now famous marshmallow experiments with children (delayed gratification) or even the Ashe studies on conformity with adults. The experimenters had to be careful not to influence the study participants. Even in studies that only require completing surveys, the demeanor and communication of experimenters could unduly influence the participant to answer in a certain way or maybe think twice about providing personal information, etc. For example, a smile, a nod of the head, or any other sign from someone associated with the study in an authority or leadership position could have inadvertently led the results to be confounded (aka, messed up) by what is known as demand characteristics. 

Demand characteristics: in an experiment or research project, cues that may influence or bias participants’ behavior, for example, by suggesting the outcome or response that the experimenter expects or desires. Such cues can distort the findings of a study.

By influencing the participants in a study, the results might be inaccurate, leading to all sorts of misguided conclusions. 

The same idea can apply when asking clients to take tests as part of the financial planning process. If the advisor is present while the client completes the test, the client may feel the need to respond in a way he believes the advisor wants him to. This is akin to self-presentationwhereby we unconsciously want to put our best foot forward or to “present” ourselves in the best light possible when around other people.

The same can happen when asking clients to complete tests with the advisor present. When does this happen in financial planning? The typical scenario is in administering risk tolerance questionnaires (RTQs) to clients, a commonly used test as a result of industry requirements for measuring risk tolerance. It continues to be quite common for this assessment to be administered to clients either in person or virtually with the advisor present (in person or virtually, to some extent). This can lead to potentially detrimental results to an investing portfolio. For example, imagine a client completes an RTQ with the advisor present. They have just finished discussing the client’s need to assume a portfolio allocation that undertakes a large amount of risk to meet the client’s financial objectives and goals. The advisor nods and smiles as the client takes the test, perhaps encouraging the client to respond increasingly in a way that makes the client choose risky options, despite the client actually being highly averse to risk. Unfortunately, the possibilities of how the advisor could impact the client’s responses are endless. 

Clients Managing Impressions

Researchers in behavioral science diligently work to avoid situations where demand characteristics are exhibited. But what about a real-world application of the same phenomenon? When clients respond to questions about themselves, either through a structured interview process or via test questions, undoubtedly some inaccurate information seeps into the evaluation. 

Particularly in psychological testing and personality testing, some amount of socially desirable responding may occur. In some cases, even if the test administrator (the advisor) isn’t physically or virtually present, a client may still respond in a way that is not entirely accurate. For example, we may consciously or unconsciously respond inaccurately. Like self-presentation discussed earlier, socially desirable responding can add some inaccuracies to the test results. Let’s look at two “types” of social desirability in personality testing:

  1. Self-deception. In this case, the client believes something about himself that is inaccurate. As human beings, we differ in how much self-deception we use in our evaluations, so even that can depend on the client. This is more difficult to untangle, but having reliable tests that also ask about past life experiences (see below) can be a good start in combatting self-deception.
  2. Impression management (also known as “faking”). Can personality tests be faked? Yes, they can. If you want to “look like” the ideal candidate for a job, for example, and you’re generally not constrained by morality or social norms about lying, then yes, you can fake some personality traits. But there’s a second question: Do people fake personality tests? The answer, even in the context of personnel selection (a “higher stakes” application of personality testing), is that typically they are not.

Even though socially desirable responding could impact results, personality tests are still useful. In fact, a meta-analytic study of the effects of socially desirable responding found that personality tests were still valid (that is, accurate) predictors of future behaviors, particularly in the context of high-stakes testing (again, personnel selection). 

Curtailing The “Presentation” Effects in Financial Planning: Best Practices for Implementing Tests

How can you ensure you get the most accurate results possible from personality tests? How can you avoid some of the inherent issues when trying to measure a client’s unique characteristics? Here are a few best practices for using tests in the context of the advisor-client relationship:

  1. Select a test with reliability and validity evidence. A personality test or test that measures some unseen characteristic about your client (e.g., risk composure) should have documented evidence that the test is reliable and valid. Reliability refers to the test measuring the same thing over and over again. Validity refers to the accuracy of measurement: is the test really measuring what it says it is? By having a reliable and valid test, you can rest a bit easier than the test publisher has eliminated some of the errors in measurement that could come from the client trying to game the system.
  2. Use a test with questions that ask about past experiences. One way to avoid the issues of deliberate impression management is to ask about past experiences using what are known as biodata-type questions in the test. It’s much easier to fake questions about preferences and attitudes than questions about what you did in the past.
  3. Implement “solo” (unproctored) testing. Asking clients to complete a risk tolerance questionnaire, or any questionnaire, in front of you (e.g., in your office) is a straightforward way to add error to measurement. Or, said less scientifically, face-to-face testing is the worst option when using assessments in the context of the advisor-client relationship. A client may feel pressure to respond to questions in a way he thinks you want him to or may try to manage his impression by responding in the “best” light possible. 
  4. Avoid tests that require explanations for each test question. Anecdotally, we’ve talked to advisors that say they cannot use unproctored testing because the test questions are so complex that they have to explain them to their clients or at least be available should the client have questions. This requirement should be a red flag that the test is not well designed (or at least not designed for a financial planning population–that is, your clients!).
  5. Provide clear instructions. Basic and consistent instructions can help ensure accuracy in responses. Here are a few basics to communicate to clients:
    1. Take the test on your own.
    2. Complete the test quickly, without thinking too much about each question.
    3. Remove distractions – find time to take the test.
    4. Note questions you have and follow up afterward.
  6. Share the benefits of accurate responding. Ultimately, a test is valuable based on its results and how those results are applied. By having an accurate picture of a client’s personality, the advisor can use the results to explore past experiences, uncover significant life goals, and tailor the communication and presentation of the financial plan to ensure it aligns with the client’s unique perspective. If the results are inaccurate, the benefits of using tests cannot be achieved.

The Benefits of Personality Testing in Financial Planning

Measuring unseen characteristics of clients is not an exact science. Nevertheless, reliable and valid personality tests give advisors critical insights about a client’s mindset. Tests can provide a starting point for ongoing client discussions and a way to efficiently anticipate what a client might do next, especially at the beginning of a relationship. In the context of the advisor-client relationship, unproctored testing is the way to go. 


Ones, D. S., Viswesvaran, C., & Reiss, A. D. (1996). Role of social desirability in personality testing for personnel selection: The red herring. Journal of applied psychology81(6), 660.

Paulhus, D. L. (1986). Self-deception and impression management in test responses. In Personality assessment via questionnaires (pp. 143-165). Springer, Berlin, Heidelberg.

Paulhus, D. L. (1984). Two-component models of socially desirable responding. Journal of personality and social psychology46(3), 598.

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