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What is it about?

Over 3000 adults in the UK completed a ‘Big Five’ personality test and reported on their property wealth, savings and investments, and their physical valuable items. We also had data on their age, education, household income and gender. The sample was fairly representative of the UK population, so our results are more relevant to how ordinary people accumulate wealth than the extrordinary wealth of billionaires. As we expected from prior research, the strongest predictors of wealth accumulation were age and household income. Income provides opportunities to save and invest, and age represents time over which wealth can accumulate. However, wealth is also about what you don’t spend and the care with which you save and invest. It is here that personality traits are likely to have the most effect. Personality In recent decades there has been increasing agreement among personality psychologists on a five-factor model of personality . This ‘Big Five’ model has five personality factors: neuroticism/emotional stability, conscientiousness, agreeableness, extraversion, and openness. This model does not imply that personality can be reduced to only five traits, but rather that these five factors represent personality at a broad degree of abstraction: each factor can be further subdivided into multiple ‘facets’. A wide range of studies have found personality effects on financial performance and financial wellbeing. Of the five personality factors conscientiousness is the strongest, and most consistent predictor of our three measures of wealth. This is perhaps unsurprising, as is also the strongest predictor of nearly all positive work outcomes. Conscientiousness is associated with hard-work, forward-planning, reliability, parsimoniousness, industriousness, and responsibility. One of the most interesting findings is that conscientiousness is more strongly associated with our three measures of wealth than either gender or education. Both conscientious and education tend to lead to better paid jobs, but it is probably the former that is associated with how money is invested and spent. Although the relationships were weaker than for conscientiousness, we also found relationships with other personality traits. Extraversion concerns sociability and assertiveness (versus social reservation and timidity), and is also associated with impulsiveness. Whilst prior research has found extraversion to be positively related to economic wellbeing this is primarily via career success and salary level. This study also shows a modest but significant relationship between extraversion and income. However, in relation to wealth, both correlation and regression results show a modest but significant negative relationship between extraversion and savings and investments but a positive relationship with wealth held in physical items. This is is likely to relate to the known association between extraversion and impulsiveness. It consistent with the experimental finding that extraverts are more liable to purchase overpriced assets leading to poor investment decisions. While extraverts had less in savings, they tended to have more in (possibly precious) objects, perhaps because of their greater tendency to impulsive spending. Agreeableness concerns the extent to which the person is warm, agreeable, co-operative, trusting, and motivated to help others and act in their interests, versus cold, disagreeable, distrusting, and aggressive and disregarding of others’ interests. Agreeableness was inversely associated with savings and investments, possibly because of the altruism associated with agreeableness. Openness concerns active imagination, preference for variety, intellectual curiosity and willingness to challenge authority versus closed-mindedness, dogmatism, and conservative attitudes. It is the personality factor most strongly associated with intellect and intelligence. Openness was negatively associated with property wealth possibly because that sort of wealth “ties one down” for long periods of time and prevents the experimentation that is associated with being open-to-experience. Neuroticism concerns habitual levels of emotional volatility and anxiety versus emotional stability and calmness. Those high on neuroticism are particularly prone to anxiety and acutely sensitive to risks (John, 2021). A key way in which neuroticism can affect financial behavior is through its expression as lower emotional stability, and anxious avoidance of risk. Neuroticism showed an inverse relationship with physical items suggesting perhaps that emotionally volatile people invest in experiences rather than possessions. Implications of our study First we should note that personality changes only slowly over the life course or in response to major life events. However, our results suggest that for financial advisors and financial services firms, understanding clients’ personality profiles may be helpful in tailoring advice and services to their individual needs. For example, our results suggest that extrovert, agreeable clients who are low on conscientiousness may need additional support to make regular savings and extroverts may be more prone to impulsive spending on physical items reducing capacity to invest. Clients who are high on agreeableness may be keen to balance taking care of their own financial future with providing help to others in their kinship and friendship networks. Their high trust may also make them more vulnerable to financial scams and more predatory financial products. Clients high in neuroticism may need greater support with managing the anxiety of investing in risk bearing assets and in managing the emotions induced by market volatility.

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Why is it important?

Are the kinds of habits and behaviours that make you wealthy hard-wired as part of your personality? In a large study of UK adults Adrian Furnham and I looked at the role of personality in wealth accumulation. Our results suggest that personality matters. In particular, the personality trait of conscientiousness, is associated with greater wealth accumulation. The results may be especially helpful to financial advisors and providers of financial services.

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This page is a summary of: Personality and wealth, Financial Planning Review, April 2023, Wiley,
DOI: 10.1002/cfp2.1158.
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