Personality can drive financial decision making and behaviour in finance. As a financial planner, understanding a client's personality can assist in the client discovery process. As a client, understanding your own personality can help you re-evaluate your risk profile, learn about your strength and weakness in money management and how to connect with the advisor. One perspective to consider when measuring personality is the Five Factor Model. The Five Factor Model includes openness to experience, conscientiousness, neuroticism, extraversion and agreeableness. A person can be within the spectrum of high and low of each factor. The Five Factor Model is useful as it can transcend cultures and languages and therefore support a diverse range of clients. It is also a valid and reliable self-report measure.
Personality tests will measure individual differences that can help understand how people think and behave. Theory can influence how personality is developed. For example, there is the biological theory where hormones or chemicals in the brain influences personality, then there are genes and the psychosocial theory where attachment and social relationships develop personality. There is also the self-regulation perspective where prior intentions influence behaviour and cognitions drive personality. While there are many theories it makes sense that each one has merit and suggests that personality can be stable when considering the genes but also change when considering psychosocial and self-regulation theory.
A financial planner can understand a client's behaviour by using a personality test such as the Five Factor Model otherwise known as the Revised NEO Personality Inventory. For example, a client who is agreeable may not express his or her preferences as they want to be liked and don't want to offend others. The client may walk away with advice that does not meet their needs. To mitigate this problem, the planner can ask the client more questions to ascertain a deeper understanding of the client's needs. A client who is conscientious may be overconfident in their capacity to manage finance or may believe they have a high tolerance to risk. If a client scores high in neuroticism it may mean that they are overly anxious. You would then provide more information to help the client feel comfortable with the advice so they can make the right decision. You may also provide enough information in the Statement of Advice, which in turn will enable to client to hire you as they will feel supported. A limited Statement of Advice may not be sufficient. If a client scores high in openness to experience which correlates to intellect, they will ask more questions and may even know more than other clients. If you don't allow the client to ask the questions and become irritated, you may lose their business. However, a client who is high in agreeableness won't ask questions as they will worry that they are bothering you or may agree with everything you say while deep down inside are really not happy with the advice but will have trouble speaking up. However, that doesn't mean they are low in conscientiousness. They may be knowledgeable but want to be polite and not ask too many questions. A client who is low in agreeableness may complain a lot, become upset and seem rude as they are not overly concerned about being polite. If you knew early enough you can work with it but adjusting how you communicate. A personality test can allow you to gain enough insight to manage your advise that is supportive and in the best interest of your client.
A person who is high in conscientiousness can learn that their strength is to seek knowledge, but if they are also high in neuroticism can learn how to manage their anxiety in money management and risk. If they are high in extraversion in the excitement-seeking facet, they may need to manage how they invest as it can influence decision making to seeking excitement rather than using a rational objective approach.
In summary, a personality test such as the valid and reliable NEO Personality Test can give you a deeper insight into providing supportive advice to your clients and enable you to keep them longer by ensuring they feel understood. It can also provide those who want to manage their own money insight into their own behaviour to make better decisions.