Dian's Column
Dian's Archive


Barclays' Financial Personality Assessment determines your investing behavior


Getting out of the market at just the wrong time or selling your winners while holding on to losing investments are two very simple yet effective ways to wreck the value of your portfolio.

They're also common irrational investment behaviors, according to those who understand behavioral finance.

But fear not: For those with a few million who want to know more about themselves, how they feel and think about money and investing, Barclays Wealth offers some personalized answers.

Barclays has been managing money for the wealthy for more than 300 years, so it must be doing something right. Four years ago it stepped into the world of behavioral finance by offering clients and prospects a chance to learn more about themselves via a Financial Personality Assessment.

They are one of the first investment firms to offer such an opportunity and have done so in true Barclays style: by creating an in-house global team made up of five behavioral finance specialists, four with PhDs and one with a master's degree.

Although the thought of taking a quiz to assess one's investing behavior might sound unappealing, it really isn't. I know. I took the 36-question quiz and from it found the experience more interesting than I'd originally expected. However, I did find the suggested investments that resulted from my answers daunting. More on that front later.

"Dedicated to our Private Banking clients, the notion (after completing the Financial Personality questions) is to start a structured conversation with our clients about who they are as investors, what their behavioral tendencies may be, and from that how their answers might map to the actual outcome they desire," said Michael Liersch, head of behavioral finance and investment philosophy in the Americas.

The idea makes common sense. Particularly after you think about it and realize that finding an investment, or investments, to meet your needs really does first begin with you.

Liersch said the traditional approach to money management has been with a product but that "we're starting with the client and backing them into their investment portfolio."

More than 10,000 prospects and clients around the globe have taken the Financial Personality Assessment so far, most from outside of the United States. That's because it has only been offered here for the past year and a half.

Surprisingly, the three dozen questions in the FPA are all basically simple ones. Some seemed repetitious and, of course, there are no "correct" answers. All you're asked to do is to select the answer that feels the most comfortable to you by checking one of five boxes with headings that typically range from "strongly agree" to "strongly disagree."

A few of the questions:

  • "I would be unhappy with consistent, positive annual returns if I saw that stock markets were doing better."
  • "I get stressed easily."
  • "Even if I experienced a significant loss on an investment, I would still consider making risky investments."
  • Your answers wind up measuring your individual financial personality traits and thus how they influence your feelings about things such as taking investment risk, your approach to financial decision-making and what value you place on investment performance.

    Analyzing the answers

    According to Joe Dursi, head of portfolio consulting, my profile indicated I had the investment tendencies of an entrepreneur. "What we see with entrepreneurs is that in their own line of work they are very aggressive risk takers, because they have to be -- they started their own business."

    But, there's a but. He added that although these risk-takers can see putting their own capital aggressively to work for them in hopes of getting a handsome reward five or 10 years down the road, in the short term, they're not big risk takers and like to have control of their money.

    Dursi says the risk tolerance part of the FPA is important to someone with a similar profile because it's so important for him or her to stay the course over the short term, even if markets are bumpy, if they really want to meet their long-term financial goals.

    You'll receive a bundle of information presented in each of two spiral bound books after taking the FPA.

    One addresses the six aspects of one's financial personality.

    The other, a Barclays Wealth Investment Philosophy Customized Portfolio.

    Of the two, I found the data regarding my financial personality results to be more confirming than surprising. But as I mentioned earlier, I was surprised at the portfolio suggestions.

    What Barclays said

    Barclays was kind enough to pretend that I had $20 million to invest with it.

    A dear, isn't it.

    And in the end, it had divvied that money into 21 managed portfolios representing nine asset classes ranging from cash to commodities and alternative trading strategies to real estate.

    Of course, the portfolio was only a suggestion.

    Anything and everything in it could be changed, forgotten about and open to discussion.

    Nothing was carved in stone.

    But if I really were investing, it would take a lot of time and reviewing on my part to thoroughly understand each suggested position.

    I asked Dursi how much time he'd spend with a client discussing the suggested portfolio.

    "As much time as they'd like," he answered. "And we would provide them with information about each of the managers, how many people work at their firm, how many assets they have under management, what their investment style is. Whatever you'd like."

    He added that it could take a number of months before a client made his or her investment decisions.

    Age may not bring expertise

    After hearing that, the only investment decision I wanted to make was to go shopping.

    After all, 20 mil is a lot to invest -- even in pretend dollars -- and it's sale time on Worth Avenue.

    That said, if there's one take-away to glean from my Personal Financial Assessment experience it's one that centers on age and investing smarts: I'd always thought that the older one got, the smarter they became.

    Turns out, that's not so when it comes to investing.

    "The research shows that as you get older, perceived financial expertise decreases," says Liersch. "So your actual expertise probably increases with age. But, your perception of your expertise decreases with age because the more you know, the more you know you don't know."

    To read more articles, please visit the column archive.

    [ top ]