Your Client is Neurotic. Now What?

“Neuroticism” is defined as a trait indicating a chronic level of emotional instability and proneness to psychological distress.¹ People with high levels of neuroticism are described as less predictable and less consistent in their emotional reactions, tending to interpret ordinary situations as threatening and minor frustrations as difficult.

The survey questions included measures of neuroticism, including whether individuals get overwhelmed by emotions, are worriers, worry about things, and panic easily.

Openness (to experience) is defined as the tendency to be open to new aesthetic, cultural, or intellectual experiences. Individuals high in openness are intellectually curious, open to emotion, sensitive to beauty, and willing to try new things. They are more likely to be creative, aware of their feelings, and entertain unconventional ideas.

The survey measured openness by asking respondents to self-evaluate their ability to come up with new and different ideas, being original thinkers, and loving to think up new ways of doing things​​.

Methodology

The study's authors employed a survey methodology, gathering data from affluent American investors to assess the impact of the big five personality traits on investment decisions. The study surveyed 3,325 valid respondents from roughly 150,000 American Association of Individual Investors members, resulting in a 2% response rate after filtering​​.

Participants' personality traits were measured using validated assessments, and their investment behaviors were analyzed in relation to these traits. This approach allowed the researchers to explore direct correlations between personality characteristics and specific investment choices, including risk preferences and the propensity for equity investment.

How to use these findings

You can determine the level of neuroticism and openness of your clients through a combination of observation, conversation, and potentially using psychological assessments. Here are some ways you might do so:

Observation

You can observe clients' behavior and reactions during meetings and investment discussions. Signs of anxiety, worry, or indecision might indicate high levels of neuroticism.

Low levels of openness manifest as resistance to new ideas or a preference for familiar investment strategies.

Conversation

Engaging in open and honest discussions with clients can provide insights into their personalities. Ask about clients' attitudes towards risk, their comfort level with uncertainty, and their past investment experiences to gauge their level of neuroticism and openness.

Psychological assessments

While not typically used in financial advising, standardized psychological assessments that measure personality traits could provide a more objective measure of clients' neuroticism and openness levels. These assessments should be used cautiously to ensure the results are interpreted appropriately.

Final thoughts

By embracing insights into the relationship between personality traits and decision-making, you can enhance your practice and deliver personalized advice that acknowledges the complexities of human decision-making. This approach promotes responsible investing, builds stronger client relationships, and positions you as a trusted partner in navigating the intricate financial planning landscape.

Dan coaches evidence-based financial advisors on how to convert more prospects into clients. His digital marketing firm is a leading provider of SEO, website design, branding, content marketing, and video production services to financial advisors worldwide.

¹I am using “neurotic” in laymen’s terms. A medical diagnosis of neurotic behavior should be made by a qualified professional.

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