Personality tests help individuals understand how their unique behavioral traits and tendencies relate to their saving, spending, and investing patterns. General personality factors, like those included in the so-called “Big Five” personality traits, impact money-related outcomes like income and net worth.
So while we’re helping clients understand their unique traits with individual reports and insights, this same data can help firms predict what clients might do in the future. We can also predict which prospects or clients have the personality and behavioral tendencies that make it more likely that they can transform income into wealth or, in other words, become The Millionaire Next Door.
Our research has demonstrated that specific, personality-based behavioral competencies reliably predict net worth (above and beyond demographic characteristics). One test in particular, the Building Wealth test, helps individuals understand their personality in terms of what is needed to become The Millionaire Next Door. The test measures factors like social indifference, frugality, locus of control, and planning and monitoring, all of which contribute to the ability to build wealth.
What happens when we combine these personality traits? Creating a composite (or overall) score gives us a powerful way to predict outcomes. The Building Wealth test generates an overall score called Wealth Potential. This composite score allows firms to identify at an aggregate level those prospects or clients most likely to be The Millionaire Next Door. Wealth Potential predicts net worth independent of income level or age, two demographic characteristics that positively correlate with net worth. These attributes of the test mean that the Building Wealth assessment can be used to identify likely millionaire-next-door candidates within a firm’s total client population, including both those that may already be there and those that will be in the future.
Find The Next Millionaire Next Door In Personality Test Data
So how does this process work? The science of identifying future millionaires next door is fairly simple (that is, assuming you have a well-designed and accurate testing mechanism). There are only two steps:
Step 1: Invite prospects (or clients) to take the Building Wealth test.
Step 2: Examine aggregate data on the Wealth Potential score to identify high-potential prospects.
That’s it. By asking prospects or clients to spend 7-10 minutes taking a test and providing them with a report, you’ve begun to use behavioral analytics that can help your firm identify future millionaires next door, regardless of what a client looks like today in terms of net worth, income, or age.
One of the most impactful ways to use behavioral assessments is in aggregate form, examining how your entire client base (or the entire client base of a firm) registers on various financial psychology benchmark measurements. In the application of identifying clients that have high potential for building wealth, this can be done in the “Analyze” section of the DataPoints platform or by exporting data and analyzing it yourself. Regardless of how you choose to use the data, you can identify clients from your entire client base with high potential for future financial success. How you target and communicate with those clients can be tailored to your firm’s overall strategy. (For clients who might need coaching to build millionaire-next-door habits, see an example of how this test is used for coaching here).
But Wait: Do You Really Want to Find The Millionaire Next Door?
In closing, let’s keep in mind two important points. First, personality tests aren’t perfect, nor is the science of psychometrics (we’re predicting human behavior, after all). After asking prospects or clients to take a test, it’s important to review the results, ask open-ended questions, and explore past money experiences to have a complete picture of your client’s money personality.
Second, it should be noted that not all advisors, planners, and coaches want to work with clients that possess the hallmark characteristics of The Millionaire Next Door. Undoubtedly most advisors want clients that are millionaires, but the prototypical millionaire next door possesses certain, shall we say, traits that not all advisors are eager to deal with in an advisor-client relationship. Characteristics like, for example, being critical of financial services (maybe picky is a better way to put it). Millionaires next door also tend to be confident and knowledgeable regarding matters of personal finance–maybe even as knowledgeable as many financial professionals. So before you go exploring for these needles in the proverbial haystack, engage in an honest assessment of whether this is the type of client you are really looking for.