What's your investment personality? » PRINT

By Paul Merriman
July, 2005

A simple test may reveal what kind of investor you are. If you know that, you'll have a much better chance of resisting Wall Street's misleading siren songs - and the market's emotional roller-coaster. You'll find the test and some analysis in this article.

Investing may look like a jovial, friendly business. The salespeople, the managers, the newsletters and the advertisements all seem deeply and exclusively concerned with your well-being. But I have been in the business for four decades, as a broker, a Chairman and C.E.O of a public company, a money manager, a newsletter editor, a teacher and even an occasional advertiser - and I know better!

It's true that most of the investment industry would like to do something nice for the clients and customers. But in the real world, that pleasant intention is often far from the top of the industry's priority list. The industry is highly organized, highly motivated and highly trained to do whatever it takes to get your money under management. Competition is fierce, and within the constraints of the Securities and Exchange Commission and the National Association of Securities Dealers rules, sales and marketing forces will use every trick they can to lure you to sign on the dotted line.

At the conclusion of this article you will find a self-test called "How to Succeed With Different Personalities." (Jeff and I took this test at a recent motivational conference.) The "success" in that title doesn't refer to your success as an investor. It refers to a salesman's success in identifying your personality traits and then exploiting that knowledge to pick a sales pitch to which you are likely to succumb.

This test isn't meant for customers. It's meant for salesmen, and some eager ones have memorized enough of it that they can do the calculations mentally while they are interviewing prospects. You may think a broker or salesperson is keenly interested in hearing about your goals, your kids, your past, your interests, hopes and fears. But while you share your life with him, he might be silently calculating your score on this test so he can figure out how to effectively close a sale.

We thought it would be interesting to let you take this quiz yourself. We'll show you how to evaluate the results and share some of the things salespeople are taught about how to "work with" different personality types. This quiz obviously is based on generalities, and it doesn't necessarily define you as one type of person or another. But you might be surprised at what it reveals about how your mind and your emotions work.

Take the test now

Before you take the test we suggest you print out several copies so you can have a spouse and/or friends take it as well.

At the top of the test are four columns of personality traits that you might or might not have. Check the box beside each word or phrase you think applies to you. For best results, do that now.

After you have finished the test add up the number of checked boxes for each column. Write at the bottom of each column the total number of boxes you checked. Now subtract the total of Column 3 from the total of Column 1. You will get a number, which could be positive or negative. (If it's negative, don't worry. That doesn't mean you're a bad person!) Use that number to make a mark on the vertical scale in the middle of the blank grid, either above or below the center line depending on whether your score was positive or negative. Now subtract your Column 4 total from that of Column 2 and use the resulting number to make a mark on the horizontal line in the middle of the grid. Put an X or a star in the place on the grid where your two points intersect. Now you're done.

According to the authors of this test, your place on the grid identifies you as one of four personality types, identified on the grid. How far you are from the center indicates how strongly you identify with certain personality traits.

The vertical scale measures whether you are primarily driven by facts or by emotions. The horizontal scale measures how slowly or quickly you are likely to make decisions. These traits are extremely valuable to a salesman, who can then tailor his pitch directly to you, (perhaps while you are thinking how nice it is that you have found somebody you are "compatible" with).

How to sell

Here's what salespeople are taught, based on this test. To sell to the ANALYTICAL person, give them lots of information and statistics and give this person lots of time to absorb the data. If you try to force or pressure an analytical into quick action, you'll just turn him off. You might even score compatibility points by encouraging him to take all the time he needs and to ask plenty of questions.

The DRIVER personality also wants lots of facts. But this person likes to make decisions more quickly and move on to other things. Use a fact based bottom-line oriented pitch and reinforce the notion that he is in control of the situation.

If you're dealing with somebody whose personality falls in the lower half of the grid, base your pitch on positive emotions. An AMIABLE personality type will probably take a strong interest in you personally and will want to trust someone. Ideally, you can foster a sense of trust in you as an individual and trust in whatever you want to sell. Remember to take plenty of time to build an agreeable relationship with this person, and don't push for quick decisions.

An EXPRESSIVE personality also reacts strongly to emotional factors, but will likely move more quickly. To persuade such a person, show a lot of enthusiasm. Keep the spirits high, and see if you can slip a pen into his hand and get him to sign the contract while there's a big smile on both your faces.

Does this quick analysis give you any clues about sales pitches you like or hate? A lot of people come away from my presentations with very different reactions to my enthusiasm. They all have the same input from me, but some think I am a terribly hard-selling pitchman. Some others think I've got the perfect mixture of facts and emotions, drive and reserve.

How to protect yourself

I've shown you how to look at your test results from the point of view of someone trying to sell you. Now let's look from your own point of view. If you're an EXPRESSIVE, think about the danger you are in from a financial industry that thrives on quick sales and finds it easier to focus on hope for the future than on hard, cold facts. For many salespeople, you could be the ideal client, one who accepts the sales pitch and writes a check in 15 minutes. This is the quadrant where you are most highly at risk of falling for an enthusiastic broker who may or may not be competent. In fact, nothing is more dangerous than a professional salesperson coupled with a trusting, enthusiastic amateur investor. Think about it: if you are an expressive, you are inclined to want to make quick decisions based on emotions.

If you're an AMIABLE client, you may take longer to sign up and bond with a broker. But once you do, you're likely to stay longer and develop a deeper loyalty. Your risk is lower because you take more time to accept a sales pitch. But you may also be slower to recognize a problem and act to cut your losses.

Facts are much better investment guides than emotions, and people in the top two quadrants are in less danger than amiables and expressives. ANALYTICALS are in the least danger because they tend to be cool skeptics who can't be pushed. DRIVERS sometimes stumble in their rush to make quick decisions so they can move on to other pursuits.

Many people fancy themselves as do-it-yourself investors. Our advice: unless you are a driver or an analytical, don't try to do investing yourself. And most important, if you are an amiable or expressive you will be guided more by emotions, which typically lead you in the wrong direction, than by the analysis of facts.

Expressives 'R' us

My son, Jeff, and I both took this test and we wound up as expressives. That may surprise some readers and clients who are used to hearing us tout the follies of following emotions and the wisdom of following facts. But remember, this test is designed to reveal a personality, not a style of investing.

I think the test shows that, consciously or unconsciously, Jeff and I have designed our investing style to compensate for our own personalities. We know we would make poor decisions if we didn't have a strict discipline. Even though I may be inclined to make quick, emotional decisions, I'm analytical enough to know that emotional investment decisions usually lead people places they don't want to go.

Feelings and enthusiasm are wonderful. Without them, the world would be cold, lonely and dull. But when it comes to investing, I'll take the cold, mechanical, analytical approach every time. You can count on it.

» Download How to Succeed With Different Personalities Test (PDF).

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