• Analyze a client’s degree of risk and loss aversion and insure recommendations are consistent with a client’s risk propensity, attitudes, capacity, knowledge, and needs.
• Explain how a client’s psychological profile, such as a
Meyers-Briggs assessment, and learning style, and values impact the format of the plan produced and presented.
• Evaluate how a client’s values, including cultural and religious values and attitudes will affect his/her goals and a planner’s recommendations.
• Describe how behavioral psychology, such as a client’s comfort zone, impacts a client’s objectives, goals, understanding, decision making and actions.

TOPIC 74: CLIENT AND PLANNER
ATTITUDES, VALUES, BIASES, AND
BEHAVIORAL CHARACTERISTICS
• Differences may arise unexpectedly between the client and the planner from their
• Cultural backgrounds
• Family experiences (traditional and non-traditional)
• Stage of life
• Age
• Level of education
• Knowledge, experience, or expertise
• A planner may need to set aside personal attitudes, values, and biases in order to help the client achieve his or her goals because the financial plan is for the client, not the planner

• A planner must not impose the planner’s own risk tolerance on the client but must seek to discover the client’s risk tolerance
• While a planner can ask the client directly, clients can be unreliable in identifying their own risk tolerance
• A planner can use various tools for determining risk tolerance, including quantitative tools, questionnaires, past actions of the client, direct questions to the client, and demographic characteristics

• A measurement of the amount of risk a client can afford to take on.
• May be based upon the client's ability to adjust goals, reliability and sources of income, and ability to absorb losses in the investment portfolio without having a detrimental impact on standard of living.

TOPIC 74: RISK TOLERANCE
VS RISK CAPACITY
• If a client needs retirement income of $40,000 per year and their pension and Social Security provide $40,000 per year of income, the client would have unlimited capacity for risk in the investment portfolio, however, he or she may not be able to sleep at night knowing the investment portfolio is at risk
• In this case, risk capacity > risk propensity
• Use the more conservative of the two

TOPIC 74: RISK TOLERANCE
VS RISK CAPACITY
• A client may have the capacity to pay for long-term care expenses, but does not like the idea of having to do so.
• Risk tolerance < capacity
• Use insurance for protection

• The planner seeks to develop a plan that serves the client’s life goals including
• Financial
• Personal
• Emotional
• Spiritual
• Other goals
• The financial planner inquires into the client’s reasons for building wealth to find what the client really values and to learn how the financial piece fits into the larger picture of the client’s life

TOPIC 74: PSYCHOLOGICAL
PROFILES
• Understanding individual perceptions and judgments
• Allows the planner to communicate more effectively and present the financial plan in a manner that is meaningful to the client
• Meyers-Briggs Type Indicator (MBTI)
• A psychometric questionnaire designed to provide insight regarding how people perceive information and make decisions

TOPIC 74: MEYERS-BRIGGS
TYPE INDICATOR (MBTI)
• Identifies 16 distinctive personality types based upon whether a person is:
1. Extrovert [E] (focus on outer world) or Introvert [I] (focus on inner world)
2. Sensing [S] (focus on basic information) or Intuition [N]
(interpret and add meaning to information)
3. Thinking [T] (look first at logic or consistency when making decisions) or Feeling [F] (look first at the people and special circumstances).
4. Judging [J] (when dealing with the outside world prefers to get things decided) or Perceiving [P] (when dealing with the outside world prefers to stay open to new information and options)
• Each of the 16 personality types is considered equal

TOPIC 74: MEYERS-BRIGGS
TYPE INDICATOR (MBTI)
• Extroverted:
• Outgoing and friendly in social situations
• Self-confident
• Loves crowds
• Maintains large groups of friends
• Derive energy from others
• May jump into an activity without thinking it through
• Able to think positively in the midst of negative information or ambiguity
• Introverted:
• Self-conscious, often wondering whether they fit in or are doing things right
• Nervous
• More focused over longer periods of time
• Shy in new or uncertain situations
• Make decisions through private reflection instead of public discussion
• Think deeply and reflect internally before taking action
• Some studies suggest introverted personalities are strongly correlated with
• More prone to react to negativity and see ambiguity as negative

TOPIC 74: MEYERS-BRIGGS
TYPE INDICATOR (MBTI)
• Sensing:
• Detail oriented
• Attention to facts may cause missed opportunities
• Remembers events based on experience
• Concerned with the present
• Occupied by what is actual and tangible
• Trusting of experience
• Pragmatic
• Learns from practical application
• Intuition:
• Remembers events based on an impression of the experience
• Tries to read between the lines
• Learns by thinking through every angle
• Willing to try new things
• Trusts gut feelings
• Likes to see the big picture, then find out the facts
• Solves problems by leaping between ideas
• Thinks more of the future than the past

TOPIC 74: MEYERS-BRIGGS
TYPE INDICATOR (MBTI)
• Thinking:
• Drawn to technical and scientific fields
• Task oriented
• Values fairness
• Makes decisions with the head, not the gut
• Looks for logical explanations and solutions
• Prefers objectivity to “personal’ elements
• Thinks in terms of pros versus cons
• Feeling:
• Values the opinion of others
• Is able to judge decisions from the point of view of another person
• Makes decisions based on what is perceived to be best for others
• Makes decisions with the gut or the heart, not the head
• May prefer to be tactful rather than tell the truth

TOPIC 74: MEYERS-BRIGGS
TYPE INDICATOR (MBTI)
• Judging:
• Needs to be shown progress
• Uses step-by-step decision-making processes
• Works well with deadlines
• Makes “to do” lists
• Likes organization
• Rarely procrastinates
• Is task-oriented
• Perceiving:
• Is flexible and adaptable, and creative
• Likely to procrastinate
• May not work well on deadlines
• Open to new experiences and ideas
• Doesn’t like planning functions
• Works in bursts of energy

• Three major learning styles
• Visual
• Pictures, charts, and graphs
• Auditory
• Listening to a verbal explanation
• Kinesthetic
• Hands-on
• The planner should to be able to adapt his or her presentation to match what is most meaningful to the client