FSA good practice dictates that advisers are comfortable with the processes they use to ensure that:
We concur. That’s why understanding attitude to risk and risk profiling has always been a core element of the advice process and at the heart of Dynamic Planner.
Using our methodology, advisers can create a risk profile in four steps. This process helps to build a deeper insight into the customer’s requirements and check the extent of their understanding. Understanding attitude to risk and risk profiling is a core element of the advice process and at the heart of Dynamic Planner.
Step 1: Complete the psychometric risk profiling questionnaire, integrated into the fact find and needs analysis process. Developed with industry-leading psychometric consultancy, Oxford Risk (a company led by academics from the University of Oxford), our questionnaires have been shown to have a reliability of 84% (10 question version) and 92% (20 question version) in predicting attitude to investment risk.
Step 2: Dynamic Planner then automatically checks the consistency of the responses and identifies answers outside the expected range, using question mark icons. They highlight areas where the adviser and customer might need to discuss risk concepts further. We use an algorithm back-tested against thousands of previous responses, to ensure that the highlighting process is helpful and appropriate.
Step 3: The customer completes a few additional questions relating to their investment timeframe, capacity to tolerate possible losses and liquidity requirements. The answers do not alter the psychometric attitude questionnaire results but act as a prompt for meaningful discussions to ensure the most suitable outcome is achieved.
Step 4: The selected risk profile gives a score out of 10, a Plain English explanation of how comfortable a customer in that profile would be with the possibility of losing investments and investing in higher-risk investments to get better returns, a likely portfolio asset allocation and an indication of the expected range of returns over 12 months.
The Plain English Campaign has given our risk profile descriptors their Crystal Mark seal of approval. This will help advisers to ensure their advice is 'fair, clear and not misleading'.
Using our process and the conversations it triggers, both adviser and customer should be confident that the final outcome is an accurate and fair reflection of the customer’s risk tolerance and capacity to tolerate possible losses.
In 2011, our risk profiling tools for ‘growing pensions’ and ‘investment’ were star rated by F&TRC.
Our risk profiling can help with:
Understanding your customer’s attitude to risk allows you to ensure you deliver compliant financial planning advice, taking this into account along with their needs, income and existing assets.
Our reports provide you with quality graphics, a risk profile and an estimate of the maximum potential likely loss and gain to help the customer understand the importance of risk as part of asset allocation and investment performance.
Suitable as part of your introductory meetings or a client review, risk profiling is fully integrated with the rest of the Dynamic Planner functionality.
We can help advisers ensure their customers understand attitude to risk in general and how this applies to them in terms of a risk category, asset allocation and fund selection.
As risk rated funds grow in popularity, perhaps you’d like to make sure that yours are amongst the options the adviser can choose from when looking for funds directly aligned to a risk category?
We can help ensure that customers understand attitude to risk in general and how this applies to them in terms of a risk category, asset allocation and fund selection.
Our reports provide quality graphics, a risk profile and an estimate of the maximum potential likely loss and gain to help the customer understand the importance of risk as part of asset allocation and investment performance.
Suitable as part of your introductory meetings or a client review, risk profiling is fully integrated with the rest of the Dynamic Planner functionality.
Please contact us, to find out how we can enrich your customer relationships.