Understanding personality types to overcome retirement planning barriers

In our recent "Rethinking Retirement" webinar, Dominique Ellis, CFA Educational Lead at Aviva Investors, and Greg Davies, PhD, Head of Behavioural Finance at Oxford Risk, shared invaluable insights on how personality types can significantly influence retirement planning.

When approaching client conversations, understanding different personality types can better help tailor your clients’ retirement strategies to their individual needs. This article highlights the key takeaways from the webinar and how you can apply these to interactions with your clients., and ultimately improve retirement outcomes.

Behavioural finance and retirement planning

• Behavioural finance plays a crucial role in retirement planning. Understanding your clients' personality traits can help you tailor strategies to meet their individual needs.

• By using Financial Personality Assessment tools, such as psychometric assessments, you can identify traits like risk tolerance, impulsivity, composure, and spending reluctance. These traits influence your clients' financial decisions and their ability to stick to retirement plans.

• Personalisation leads to higher engagement and better outcomes by addressing specific behavioural vulnerabilities. Different clients need tailored solutions based on their unique behavioural profiles to overcome their specific behavioural anxieties in retirement.

Importance of personalised engagement

• Personalised engagement is key to higher client satisfaction and better outcomes. You can combine engaged choice with personalised nudges to help clients make informed decisions tailored to them thus fostering stronger client relationships and trust.

• Personalisation leads to better outcomes by addressing specific behavioural vulnerabilities. Your clients need tailored solutions based on their behavioural profiles to overcome their specific behavioural anxieties in retirement.

Overcoming behavioural barriers

• Clients can often face behavioural barriers, such as fear of running out of money, reluctance to spend, and emotional responses to market volatility. Understanding these barriers allows you to provide your clients with targeted support.

• For example, clients with high spending reluctance may benefit from guaranteed income solutions, while those with low composure might need more conservative investment strategies. This targeted support not only addresses your clients' specific concerns but also builds confidence in their financial plans, ultimately benefiting you by helping your clients feel more supported.

Holistic suitability assessment

• A holistic assessment of your clients' financial situations, including risk capacity, risk tolerance, and behavioural capacity, is essential. This approach makes sure that retirement plans are suitable and sustainable. Without such an assessment, you risk recommending strategies that do not align with your clients' needs, potentially leading to financial stress and poor outcomes.

• Conducting holistic assessments helps you provide more accurate and tailored advice, boosting your credibility and leading to better long-term client relationships and retention.

• You should consider your clients' financial circumstances, goals and cash flows= to determine the appropriate risk level and investment strategy.

Adapting to changing needs

• Retirement planning requires flexibility to adapt to your clients' changing needs and circumstances. You should periodically review and adjust plans to make sure they remain aligned with your clients' goals.

• The use of stochastic models can help forecast a range of possible outcomes, providing a more realistic view of your clients' retirement prospects. This can build trust and in turn, client retention.

By understanding and addressing the unique personality traits and behaviours of your clients, you could help overcome some of the barriers that can make retirement planning less effective.

As well as better retirement outcomes, a more personalised approach can make your clients feel more considered and confident about their financial future.