There is a continued and increased focus on financial psychology in the financial services world. The CFP Board has recently updated its knowledge topics to include the psychology of financial planning, covering everything from client attitudes to critical life experiences that could shape a financial plan. Financial planners recognize that money personality is a key component of what impacts client financial success. And many planners are implementing behavioral assessments into their practices to capture these characteristics about their clients to deliver a tailored client experience.
Using the DataPoints behavioral assessments, advisors are able to understand the competencies and characteristics of wealth-building and investment management that their clients possess or need guidance on in terms of education or coaching. In our continuing efforts to expand the utility and application of our tools, we have created a financial attitudes assessment and are in the final stages of releasing a comprehensive money-personality test. Behavioral assessment results give advisors insights into their clients’ personalities and behaviors, and ultimately help them identify money attitudes, compare spouses’ perspectives, identify areas to coach and develop, and help investors make better decisions.
Meeting the Need of Understanding “Why”
One of the areas we often coach advisors to consider is the why behind their clients’ scores on the various assessments. As an example, if a client scores low on Volatility Composure, our measure of the emotional side of investing from our risk tolerance assessment, there could be several reasons. Instead of jumping to a conclusion, we provide structured interview questions to help advisors facilitate client discussions and uncover the “why.”
Another way of understanding why clients (or any of us) do the things we do when it comes to money is to examine our underlying money beliefs. By examining the narratives or “scripts” that a client operates under when it comes to finances can be extremely valuable in coaching and guiding clients to move away from those narratives that could be impeding their ability to achieve goals. When many in the financial services community think of “money beliefs,” they might first think of Dr. Brad Klontz and the Klontz Money Scripts Inventory-II (or KMSI-II for short), the original assessment that measured money scripts® in terms of four different components:
- Money Avoidance – Belief that money is evil; that less money is better than more
- Money Focus – Beliefs that money is the critical component in happiness; money can solve all problems; there is never enough money
- Money Status – Self-worth is tied directly to net worth; outward displays of wealth are important; money will “take care of itself”
- Money Vigilance – Concern about saving money; belief in the value of saving and working for money; financial handouts are negative
Being high on any or all of the factors above could indicate a belief or viewpoint about money that could impede a client from making the best saving, spending, and investing decisions.
KMSI-II Online: Exclusively Through DataPoints
DataPoints has partnered with Klontz Consulting Group to be the exclusive online commercial publisher of the KMSI-II. Financial planners, coaches, and therapists can quickly invite clients to complete the online version, get immediate results, and provide personalized insights back to the client. By using the KMSI-II on the DataPoints behavioral platform, financial planners will be able to:
- Invite clients to complete the KMSI. Send clients an invitation to complete the KMSI-II (for the client, no account to create or password to remember), or have clients start the test automatically from your client portal.
- Create ongoing engagements based on results. The results provide insights into a client’s underlying money beliefs. With this insight, you can personalize your ongoing communication to help them achieve their goals.
- Compare Money Scripts profiles for couples. One of the easiest ways to understand the unique personalities in a household is to compare results for a couple. Advisors using DataPoints can do this instantly.
- Examine Money Scripts results across the firm. At an aggregate level, advisors use assessments to examine firm-wide results. These insights can help to guide the kinds of client education and communication strategies that will be beneficial to the majority of clients.
- Access advisor- and client-facing reports with detailed insights and guidance. Advisor reports have detailed insights to help you understand your client, and your client receives a personalized report as well.
Beyond Money Scripts
In addition to the KMSI-II, advisors will also have access to the Financial Health Scale (FHS), a short measure of overall personal financial health. Additionally, psychologists, therapists, and coaches can also request the Klontz Money Behaviors Inventory (KMBI), an assessment of clinical-related money disorders.
Download our overview to learn more. Read more about our partnership in our press release. Sign up for a free, two-week trial, and begin inviting clients to complete the tests and gain a deep understanding of their financial psychology with DataPoints.