Comic book heroes are dominating box offices as favorite picks for this generation of movie audiences—Spider-Man, Thor, Wonder Woman, Batman, the Avengers. Each of these superheroes fights crime or evil with their special powers. All these characters and countless other on-screen champions fit the hero archetype. Millions love what these defenders of right do—and they shell out billions of dollars to watch them do it.
The Hero isn’t the only movie archetype of course. There are famous storybook villains—Captain Hook, Sauron, the Wicked Witch of the West. And then there’s the levelheaded, wise old sage—Yoda, Gandalf, Aunt May—who the hero goes to for advice. By associating characters with archetypes, their strengths and weaknesses become more apparent, and their behavior becomes more predictable.
Financial experts have spent years researching the relationship between personality type and financial behavior. As it turns out, we all have traits that positively and negatively affect our ability to make wise financial decisions. Getting acquainted with your investor archetype can help you to develop better investment habits and set realistic expectations as you plan for your financial future. Private wealth experts Russ Alan Prince and Brett Van Bortel1 closely studied a large group of investors and broke down their behaviors into the following nine investor archetypes. (Since personalities are complex, you’ll probably recognize your investment biases in more than one.)
#1: The Family Steward: “Good financial management allows me to take better care of my family.”
Most of the goals for Family Steward dentists are linked to obligations such as paying for children’s college, having a nice home for family gatherings, and transferring wealth to the next generation. These individuals often find emotional satisfaction in bringing their children into dentistry and facilitating a generous succession plan—even if it means sacrificing their own financial health.
Advice: If you aren’t careful, you may give your kids a crutch that precludes them from learning to work hard like you did. Your generosity may actually hurt your own retirement. Build a solid retirement foundation before worrying about which child is going to follow you in dentistry.
#2: The Independent. “Successful financial management means freedom.”
Independents seek the freedom (and financial security) to do whatever they want. They could be associates working for a large group, or independent practice owners. But the common thread is a dream of financial freedom that allows them to enjoy hobbies, travel the world, and pursue entrepreneurial ventures.
Advice: Be aware of your tendency to neglect practice responsibilities in the name of lifestyle experiences. Carve out time for fun, but also deliberately allocate time for practice-building and investment activities.
#3: The Phobic: “The last thing I want to talk about is my money.”
The Phobic doesn’t feel comfortable with the responsibility money brings and would rather delegate important decisions to a trusted wealth manager (who was usually hired on a gut feeling). They avoid hard, uncomfortable decisions about finances and take an “I’ll just see what happens” attitude.
Advice: You can get in bad situations because you fear dealing with difficult practice and financial issues. Find ways to take the emotion out of your decisions and be deliberate about who you hire to manage your wealth.
#4: The Anonymous: “My money is my business and no one else’s.”
Anonymous types are intensely private and hesitant to seek help or expose their finances to the scrutiny of others. Anonymous dentists generally lack financial experience but will often try to go it alone. The problem with holding your cards too close to your vest is that you’ll miss out on valuable advice from experienced finance professionals.
Advice: It’s OK to be private, but it’s not OK to rely solely on your own judgment. Find someone you trust who can give you sound feedback.
#5: The Mogul: “Wealth means power.”
Moguls seek control, influence, and power in their families, practices, communities, and finances. While they may lack interest in personal finance, they have some financial knowledge and use it as another way to flex their power and control. This is the dentist who made an investment that isn’t performing well, but because they made the decision they’ll defend it to the grave.
Advice: Recognize your limitations and admit that you don’t have all of the answers. Be willing to cede your control over some decisions and delegate to qualified parties.
#6: The VIP: “There are lots of ways to get respect and having money is one of them.”
VIPs are status-oriented and they enjoy prestige and the respect of others. To them, running a lucrative practice is a vehicle for getting attention that comes from having nice things. The problem is there’s only so much money to go around—even for a dentist. VIPs are not especially knowledgeable about finances and tend to rely upon others for advice and insight.
Advice: Watch your spending and make compromises so you can accumulate enough wealth for retirement. Just because something is high-end or luxury doesn’t mean you have to buy it.
#7: The Accumulator: “I don’t want to run out of money.”
Accumulators save more than they spend and tend to live well below their means. Like most dentists, they make plenty of money, but never exhibit any outward displays of wealth. They find great satisfaction in watching their money grow. Because accumulators hoard money, they have a difficult time changing even after retiring despite having plenty of wealth.
Advice: Give yourself the green light to spend without feeling guilty. You’ve worked hard for your money and should purchase things that will make your life more enjoyable. Also, consider hiring an advisor who can help you put a more dynamic strategy in place that goes beyond saving.
#8: The Gambler: “I love watching my portfolio. The market has better odds than Vegas.”
For Gamblers, investing is a hobby. You’ll often find them sitting in their offices reviewing their portfolios. They’re more performance-sensitive than any other group. While they’re very knowledgeable about investing, they’re not always wise—they believe, for example, that it’s possible to consistently beat the market. Not surprisingly, while they have a higher-than-usual risk tolerance, they often lack a solid foundation in the science of investment management. The big danger in the Gambler’s approach is the possibility of squandering many years of hard-earned money on a bad deal.
Advice: Wait until you’ve built a stable portfolio of diversified and predictable investments before you go after something exciting or non-traditional. You should also hire an advisor who understands your tendencies and can help you avoid the pitfalls common to your archetype.
#9: The Innovator: “I like trading my own investments using the latest technology.”
Innovators have a high level of confidence in their ability to analyze complex financial issues and are quick to defend their experience level when it comes to investments. They may have even picked up some financial training before or during their dental career. Innovators like to be at the cutting edge of wealth management and are always aware of new products, innovative services, and sophisticated analytical methods.
Advice: Be aware that some of the most complex financial strategies have proven disastrous. There’s nothing wrong with your passion for investing, but before you start over-engineering your finances, be sure to build a foundation of time-tested investment strategies.
Summary—Investing and Behavioral Psychology
Your psychological biases will often work against you when it comes to investing. Be honest with yourself as you get to know the traits of your financial archetype and make sure to seek out a second opinion from an experienced advisor who not only takes the numbers into account, but helps you maximize your strengths as you plan for a bright financial future.
Reese Harper, CFP® is host of the Dentist Money™ Show, a weekly podcast dedicated to helping dentists make smart financial decisions. He is also the founder and CEO of Dentist Advisors, a registered investment advisory firm which focuses exclusively on dentists and specialists. His trademarked planning methodology called Elements® is used by dentists all over the country to plan, invest, and retire better.
1The Millionaire’s Advisor: High-Touch, High-Profit Relationship Management Strategies of Advisors to the Wealthy, Russ Alan Prince & Brett Van Bortel, 2002
This article has been updated from an earlier version titled “Character Studies” that was published in Dentaltown magazine in August 2016.