Psychology of Financial Planning

CHAPTER 19Assessment in Financial Planning

Individual differences in a client's personality, attitude, and experiences impact how they save, spend, invest, and otherwise manage their financial lives. Personality characteristics, such as conscientiousness, can predict a host of positive money behaviors [167], whereas money beliefs, such as money avoidance, are negatively related to net worth [168]. In addition, a lack of congruence between spousal money attitudes can create marital strife, and at the same time, investing‐related attitudes, such as risk composure, can predict how a client will react during a market downturn. In summary, the very outcomes we help clients obtain are influenced by their unique characteristics. Knowing your clients' underlying money‐related personalities, beliefs, and attitudes can help a financial planner:

• Align an investment strategy with the client's psychological risk tolerance
• Communicate effectively with clients by understanding their attitudes about saving, spending, investing, and other aspects of financial management
• Identify unique strengths in your client related to money management that they may not recognize
• Allow you to provide ongoing education and guidance, based on your client's experiences and background

It makes sense for financial planners to use a scientific approach to understanding clients' personalities, attitudes, beliefs, and motivations related to money. An assessment is the most common avenue to measure many key client ...