Clients have various characteristics that influence their investment decisions. Many advisors understand that a significant part of the value of working with clients is helping them manage their mindset when it comes to investing. However, understanding investor psychology requires knowing what to measure. In the following text, we will examine several characteristics that can influence a client’s overall investor psychology, also known as behavioral risk tolerance. By measuring investor personality, advisors can identify which …
Psychometrics: Measuring Unseen Client Characteristics Psychometrics is the science and practice associated with the measurement of human characteristics. These are often referred to as “unseen” individual characteristics, including cognitive ability, personality, and knowledge. Typically, psychometricians are borne out of applied psychological and educational fields. Psychometrics has been used for over a century in a variety of fields for decision-making, counseling and coaching, and self-assessment, including, but not limited to: Clinical psychology and psychiatry Educational …
A class of personality tests, known generically as “type indicators,” places clients into one of several categories based on responses to a series of questions and then provides broad descriptions of the category. Some examples of “type indicators” include the Myers-Briggs Type Indicator (MBTI) and the very popular Enneagram. Type tests are so much fun! It’s fun to see which category you (or your clients) fall into, what other movie stars or sports figures align …
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 …
If you have watched a fintech product demo that includes anything remotely related to financial psychology, you might hear the word “personality” thrown around a lot. For example, I heard one very confident salesperson recently refer to his platform as measuring “investor personality” when the tech was measuring the client’s current feelings about investing. Personality characteristics predict a wide range of future outcomes regarding human behavior. The Big Five (or OCEAN) model of personality has been …