Investments for individuals

Knowing your client's financial personality type will help you to make investment decisions that will match their risk appetite and individual preferences.

In the last three editions of FAnews, we discovered that there are nine different financial personalities, according to the Moneymax Money Personality Assessment, and we looked at the type of investment strategies that suit the Safety Players, the Optimists, the Entrepreneurs, the Hunters, the High Rollers and the Achievers. In this article we take a look at the last three personalities.

Perfectionists

Perfectionists are so afraid of making a mistake that they often avoid making a decision. Although they are good savers who don't spend money for emotional reasons, they sabotage themselves by avoiding investment risk and missing opportunities because they are not "perfect".
Perfectionists are fairly satisfied with real estate, stocks, and other investments. However, they often have distorted thinking about risk. They may believe that low-risk investments like municipal bonds and government bonds are quite risky.

Perfectionists have a difficult time trusting financial advisers, and prefer to make investment decisions themselves. They react negatively to high-pressure sales approaches and often feel most comfortable attending seminars that give them an opportunity to observe without making a personal commitment.

Advisors can help Perfectionists to learn to accept the risk and lack of perfection inherent in investing. Building trust and creating a financial plan that they can believe in will allow Perfectionists to feel comfortable in pursuing their financial goals.

Producers

Producers are the workhorses. They rank high in work ethic but lower in earned income due to lack of self confidence in money management skills. Producers are anxious about making financial decisions because they have not learned to see the larger financial picture. They believe that increasing their current income is their most important financial goal.
Producers show a dramatic preference for whole life insurance. They value the safety of the guaranteed return, and the comfort of knowing that the insurance company is overseeing their investments. Producers chose the least variety in their investments and prefer whole life insurance, bonds, and other fixed-income investments.

Fortunately, producers are trusting of others and often will allow a financial advisor to help them achieve their goals. They can benefit from a comprehensive financial plan that puts their hard-earned assets to work with a balanced approach that includes some risk. They must be encouraged to diversify their assets into appropriate investments for their financial situation.

Money Masters

Money Masters have managed to strike the perfect balance of self-confidence, risk-taking, and trust in others. They are the No. 1 wealth accumulators even though they don't necessarily earn the most. Able to take calculated risks, they have the discipline to pursue a consistent investment plan. Money Masters have an excellent work ethic, trust in their fellow man, practical attitudes about spending, and confidence in their financial decision-making skills. They have achieved pride, contentment, and a feeling of power over money.

Money Masters have the most diversified portfolios, and are most satisfied with their investments. They generally desire safety of principal with a high level of tax-sheltered growth or tax-sheltered income. Money Masters are quite effective at handling their own affairs. Advisors can be most useful by providing them with research, a second opinion, or helping them to manage relationships with significant others who may not be Money Masters.

Understanding the nine different financial personalities will help advisors to adjust their presentation to each client, create more appropriate financial plans, and encourage clients to achieve their potential for financial freedom.