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MainStreet) -- Financial advisers are looking more at "behavioral finance" -- how people's thinking affects their money management.
Successful saving and investing often comes down to having the right approach. But the right moves to make, on paper, often don't translate into the actual steps we take. Emotions and personality traits can help or hinder investing and financial planning.
How you think about money can have lead to poor financial planning and investments.
"It is incredibly important, especially if you are a financial adviser, because so much of our industry looks at the really obvious things like age and income and demographics," says Katie Libbe, vice president of consumer insights for
Allianz Life Insurance Co. of North America, of understanding the role habits and personality play. "However, there can be a big difference between a 60-year-old that has a pension but maybe was petty frugal versus a 60-year-old that may have gotten there via day trading and things like that. For financial advisers, it is really important for them to know the differences between emotional traits, values and things that aren't so easy to discover by just looking at a fact sheet on your client."
An Allianz study,
Reclaiming the Future, included research into how financial personalities affect retirement planning. That effort included a nationwide survey of 3,257 U.S. residents ages 44 to 75.
The report describes this group as "pragmatic and grounded," and their portfolios show that. "They are financially independent, they are comfortable taking risks and they are confident that their income will last throughout their lives," it says. "They tend to have large, diversified portfolios and, therefore, few financial concerns."
Another grouping with positive traits were dubbed "savvy." They were described as "financially sophisticated," confident and "in the know about most financial concepts." They typically had the highest level of investible assets among the respondents, with large, diversified portfolios and the lowest level of debt. As a result, they were also the best prepared for retirement.
Even positive traits can have a potential downside, though.
Merrill Lynch commissioned a study of investing personalities and investment mistakes.