By: Robin Taub, CPA, CA. Professional speaker and author.
Taub was commissioned by TD Wealth to try the Wealth Personality™ assessment and write about her experience.
Did you know that there are unconscious factors driving almost every financial decision you make?
It’s true. The study of how individual personality traits and emotions influence our financial decisions, including the risks we do or don’t take, is called behavioural finance.
I’ve always been interested in behavioural finance and how our personalities drive our financial behaviours and decisions. So, when TD Wealth asked me to take their Wealth Personality™ assessment to gain greater insights about myself and share my experience, I jumped at the opportunity.
The Wealth Personality™ assessment is offered to TD Wealth clients through their advisor or Financial Planner, and is based on years of research conducted between TD Wealth and the University of Toronto’s Behavioural Economics in Action at Rotman (BEAR) program.
Since 2015, TD Wealth has been harnessing the capabilities of behavioural finance. And now they've recently released the second TD Wealth Behavioural Finance Report – A Behavioural Perspective on Risk (the "report"). The goal of this work? To understand how psychological and behavioural factors may impact a person's willingness to take financial and investment risks.
Through the longstanding work conducted by TD Wealth in behavioural finance, they've developed the TD Wealth Personality™ assessment which I've had the pleasure of taking myself.
Taking the Wealth Personality™ assessment
If you're a TD Wealth client, your advisor or Financial Planner will share the assessment with you, which includes 50 statements in total. The statements are behavioural in nature, including things like “I get stressed out easily” or “I get chores done right away,” and you're asked to rate the accuracy of each statement as they apply to you.
The whole assessment only took about five minutes. Once finished, the results of the assessment are then interpreted (with the guidance of a TD Wealth advisor or Financial Planner) for financial and decision making behaviours.
Understanding your assessment results
Based in established psychological science, the assessment uses the Five Factor Model of Personality (also known as the "Big Five") and applies it to behavioural finance.
The Big Five (Conscientiousness, Agreeableness, Reactiveness, Extraversion, and Openness) are represented as a spectrum. Based on your assessment responses, your results will slot you somewhere along the spectrum of each of the Big Five (FYI: each are explained in further detail in the report).
The idea behind the assessment is that the better you understand yourself, the better you can be equipped to make appropriate financial decisions to help you reach your financial goals. By increasing your self-awareness, you can learn why you may make certain decisions and help to better understand the unconscious financial “blind spots” that might be influencing these decisions.
What I learned about my personality and how I make money decisions
After reviewing my assessment results and the recently released report, I discovered how my personality and behaviours may impact my money decisions and my relationship with risk, which was both interesting and surprising.
Here are my top three personality traits according to the Wealth Personality™ assessment and some key findings from the report that helped me better understand my financial behaviours.
I'm steady and calm under pressure
My "reactiveness" results determined that I tend to be less reactive and I remain calm in challenging scenarios – my assessment showed that I’m less likely to panic than the average person. The results also showed that I make sure my asset allocation is aligned with my long-term goals, and I stick to my investment strategy and goals during periods of market volatility – such as the March 2020 sell-off caused by the coronavirus pandemic or the 2008/2009 Global Financial Crisis.
Interestingly, my assessment results are consistent with one of the key findings of the study: Having a goal-based financial plan with a professional advisor may help mitigate risky decisions during market downturns. Furthermore, those in the study who had a plan with their advisor were 2x less likely to be tempted to stray from their investment strategy than those who don't have a plan at all. As someone who is very goals-oriented and has a goal-based plan, these findings really resonated with me. Who we are and how we behave clearly has a big impact on the investing and financial risks we take.
But on the opposite end of the "reactiveness" spectrum, someone who is more reactive may be eager to adjust their investment strategy during a period of economic uncertainty, meaning their advisor or planner may need to reach out to them right away during volatile times to remind them to stay focused on their long-term financial goals. That’s why understanding your personality is important and allows your advisor or planner to create a goals-based plan that's best suited to you and help you stick with it during times of volatility.
My "conscientiousness" results rank fairly high and indicate that I tend to be very organized, efficient and self-disciplined – which rings entirely true for me. A place for everything and everything in its right place! I’m a disciplined person when it comes to saving, eating and exercising. I value order, having a plan and tracking progress towards my goals. I love working my to-do list!
I'm collaborative with a dash of questioning
My "agreeableness" results show that while I tend to be more on the “amenable” vs. “questioning” side of the spectrum, I’m not easily swayed and I’m unlikely to second guess myself once I’ve made up my mind. My results found that I like social harmony, but I don’t just nod my head and go with the flow. I can be skeptical and I’m willing to challenge assumptions. I will also listen carefully to responses.
It can be important for you and your advisor to know whether you skew more on the “amenable” or “questioning” side of the spectrum as it can help them gauge your reaction to the advice they’re providing. A highly “amenable” person may tend to agree with or say ‘yes’ to nearly everything, even if they don’t agree or aren’t sure.
Understanding my relationship with risk
I also assess myself as being a knowledgeable and fairly confident investor, given my financial background as a Chartered Professional Accountant with decades of experience as an investor. And after reading the report, I discovered that my confidence as an investor might have an impact on my tendency to opt for a riskier portfolio. According to the report, those who claimed to be knowledgeable and confident investors were 3.5x more likely to select a volatile portfolio than those who did not have high self-assessed investment knowledge or confidence.
Choosing a more volatile portfolio is always a trade-off between risk and reward, and an overconfident investor may not have the personality or capacity to manage any potential losses. I consider myself to take well-considered risks when it comes to my investments, so I wouldn't say I'm "overconfident", but investors who are may want to work with their advisor or planner to help mitigate risk of potential loss.
Another interesting finding from the report that hit home for me on my relationship with risk – those who consider their income or the industry they work in to be volatile were 2x more likely to select a more volatile investment portfolio. Because I’m self-employed, I've become comfortable with a certain level of uncertainty that those in salaried, full-time positions may not be used to.
Whether you have a volatile income, work in a volatile industry, or neither, this is where your advisor can add value. An advisor can help clients identify behaviours that might hurt their chances of achieving their long-term goals, such as selecting a volatile portfolio when their risk appetite isn’t aligned.
Discover your wealth personality
If you want to uncover what drives your money decisions, try taking the Wealth Personality™ introductory assessment. It can help you discover why you might make decisions and uncover the unconscious financial “blind spots” that might be influencing these decisions. Armed with this knowledge, it can help create greater awareness of your strengths and take steps to help mitigate your potential weaknesses to help you reach your financial goals.
To get started with a TD Wealth Financial Planner or advisor and take the full Wealth Personality™ assessment, visit the TD Wealth website.