Exploring investment personalities: Where do you fit?

Exploring investment personalities: Where do you fit?

Learn about your financial blind spots in the TD Wealth Personality™ introductory assessment.

Level-headedness ought to prevail when it comes to managing our personal finances, but that’s not always how it works. The same personality traits that compel you to spontaneously go skydiving, or to stick to your morning run despite the frigid wind chill, may also be lurking when you make financial decisions. They can both help and hinder your efforts to reach your financial goals—sometimes without you even realizing it. 

“We think we are significantly more rational about money than we actually are,” says Lisa Brenneman, head of behavioural finance with TD Wealth. “But in the moment, we can be a lot more emotional, especially when markets are turbulent like they are right now.” It’s not easy to recognize when actions are driven by emotions if you don’t know what to look for. 

Since 2015, TD Wealth has been harnessing the capabilities of behavioural finance to understand how personality may impact a person’s willingness to take financial and investment risks. The TD Wealth Personality™ assessment is offered to TD Wealth clients through their advisor or financial planner.

Through this long-standing work, TD Wealth has now developed an introductory version of the full assessment, available online to all Canadians. Answer a few short questions to discover how you make financial and investing decisions.

“The Big Five personality traits”

The assessment is based on the five-factor model of personality, also known as the “Big Five,” which asserts that each personality is determined by five traits: extroversion, reactiveness, openness, conscientiousness and agreeableness. How much, or how little, you demonstrate each trait reveals a great deal about the way you operate throughout your life.

“The TD Wealth Personality™ assessment reveals how strong each personality trait is for you and how it may influence financial decisions,” says Brenneman. The results can help predict a client’s behaviour and identify underlying motivations which, in turn, helps the wealth advisor or financial planner to customize their approach. 

Suppose you’re assessed high in extroversion and apt to make spontaneous decisions (though not necessarily skydiving). In that case, an advisor will likely set up in-person financial discussions to hash things out rather than send emails. On the other hand, an advisor may communicate via email to accommodate those who are reflective and like to process information slowly.

If you’re calm under pressure, you’re low in the reactiveness trait and may be more naturally equipped to ride out a dip in the market. A financial advisor will reach out to those who are quick to react, especially during times of market volatility. 

Regardless of one’s TD Wealth Personality™ profile, most people struggle with financial stress at some point—whether from a market downturn or a major life change like a divorce. Emotions can disrupt the level-headedness that we know is essential to smart money management.

How you think about money matters

“Our advisors get phone calls from the client saying they feel anxious, they feel like they have to do something,” says Brenneman. “That’s the natural human reaction during financially stressful situations. We want to do something. It makes us think we’ve made things better.” An advisor who knows how you think about money can work with you through those emotional hurdles that might otherwise derail your investment portfolio which is built to withstand the highs and lows of the market over time.

The assessment results can be particularly enlightening for spouses who each completes one separately. Besides the opportunity to tell your partner, “I told you so,” it can illuminate how your personalities interact and influence financial and investing decisions. The advisor is also better equipped to engage both the client and their partner equally in discussions. 

Learning your financial and investing blind spots is yet another outcome of the assessment. These are natural tendencies, or biases, that you rely on to make quick financial and investing decisions, such as the overconfidence blind spot. 

“When it comes to money, you can lose perspective if you’re overconfident,” says Brenneman, relating it to the concept, “we don’t know what we don’t know. You can be pushing forward on something without full perspective.” 

Uncovering traits that can influence your wealth decisions makes good financial sense for anyone motivated to reach their investment goals sooner (i.e. everyone). “A simple assessment with an advisor takes just five minutes, but the value of it  can be significant,” says Brenneman. “It can help you save faster and more confidently.” 

To get a preview of your TD Wealth Personality™ profile, complete an abbreviated version of the assessment here.