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Some Clients Feel Fear, Anxiety, and Worry More Than Others
The tendency to feel worry, fear, and anxiety is normally distributed. Practically, this means that some of your clients will tend to experience these negative emotions more frequently than others, regardless of your efforts to help them become “fearless” investors, budgeters, etc. We refer to the tendency to feel negative emotions in an investing context as volatility composure, and it is related to neuroticism (also known as emotional stability), a normally distributed personality trait.
We’ve previously discussed the idea that risk tolerance should be measured by examining stable investor characteristics (like volatility composure), factors that don’t change depending on what’s happening in the market. It’s critical to distinguish between two different components of investor psychology: 1) the personality trait related to the tendency to worry (again, what we refer to as volatility composure) and 2) the state of feeling fear, anxiety, or worry (which we all feel from time to time, but some of us more than others – see point #1). We measure the STATE of an investor separately, knowing that how we feel moment to moment can fluctuate depending on what’s happening in our lives or the world around us.
More Than 50% Tend To Feel Worried About An Uncertain Future
Let’s go back to the stable trait of volatility composure. Occasionally, we like to examine a single statement or question from our tests in a survey research fashion. In one of our tests, we ask individuals to respond to the following statement: “I tend to feel worried when the future feels uncertain.” This statement measures how individuals tend to experience emotions during times of chaos, turmoil, or general uncertainty. We include it in the Volatility Composure factor, which is a component of overall risk tolerance in the Investor Profile RTQ. We know that this is a “good” item through our statistical analyses. For example, the statement relates statistically to critical investing-related outcomes (like staying in the market when there’s a downturn). It demonstrates what we refer to as reliability, as it relates to other questions or statements that are similar to it (e.g., How often do you feel worried?).
When we examine the data for this question, we see that over half of all respondents, the majority of whom are financial planning clients, agree or strongly agree with the statement. In fact, 54% of individuals report they agree or strongly agree with this statement, nearly 25% report being neutral, and 22% report that they disagree or strongly disagree with the statement.
Responses do not appear to change over time, regardless of the year, the investment environment, or global events. Since this question is designed to measure stable personality, we typically do not see changes over time in how individuals respond to it. We observe that respondents have consistently demonstrated a similar pattern of agreement over the years between 2022 and 2025, as noted in the image below.
Data On “Worry Approach” Can Empower Your Firm
At DataPoints, we typically focus on overall (or composite) scores on our tests or factor scores, such as an overall risk tolerance score or a score on budgeting attitudes. The reason we focus on these scores is that they generally perform better at predicting outcomes (i.e., they demonstrate greater validity than a single item). How can measuring volatility composure in an overall fashion (that is, using multiple different questions and statements like the one above) help you? What does this mean for your firm and clients? Here are a few takeaways:
- Recognize that clients will differ in terms of their volatility composure. Each client has a unique personality and a distinct set of life experiences that influence how they experience worry, anxiety, and fear. Knowing a client’s volatility composure in advance provides you with insights to demonstrate empathy, ask insightful questions about their past investing decisions, and personalize the client experience based on their scores.
- Your firm might attract clients that differ from the norm. You can examine firm-level volatility composure to understand if your clients, in the aggregate, tend to be like those who can let things slide or are more of the worrywart sort. Knowing where the majority of your clients fall on the volatility composure scale can help you create general communications and educational resources that can be shared across the firm. We also observe key differences in terms of clients who are the primary decision-makers in the household versus those who are not, particularly in relation to emotional stability regarding investment decisions. Examining this in the aggregate can provide your marketing and content teams with insights to meet the needs of the majority of your clients.
- Focus efforts on habits that can change (with your help!). Personality is generally stable over time. But you can positively impact your clients’ habits and decisions through financial coaching. If you’re working with a client who experiences worry more than others, creating positive habits to manage those emotions can be beneficial (e.g., setting limits on watching market news; removing updates from investing apps).
While you may not be able to quickly guide all of your clients to absolute fearlessness, you certainly can have a positive impact in moving them toward behaviors and mindsets that will make achieving their financial goals more likely. It certainly helps this effort to know what you’re working with.