Risk profiling
At RiskTailors, we believe that fitting the right portfolio to a client risk preference requires more than an off-the-peg risk number.
RiskTailors makes this an easy task by providing a simple and brief risk profiling questionnaire with clear recommendations. We apply Nobel prize-winning behavioural findings and peer reviewed academic research to quantitatively map risk attitudes to one of our portfolios.
Our questionnaire takes into account multiple sources of investment preference. Through our proprietary questionnaire, financial advisers can infer their client’s individual preferences for risk over certainty, assess investors’ level of pessimism and their sensitivity to extreme events. This flexibility will allow adviser firms to categorise their clients into five familiar risk categories, but also provide portfolios with specific characteristics that more closely fit their stated investment journey.
For an in-depth look at the construction of the RiskTailors questionnaire, read our risk assessment guide.
A better fit
Fitting the right balanced strategy
The problem
Two different clients are comfortable with the level of volatility and return expected from a traditional ‘balanced’ portfolio. However, one client regularly gets in touch with her financial advisor to modify her portfolio whenever there are large market movements while the other prefers to assess performance over the medium term.
Our solution
IFAs using RiskTailors portfolios could correctly categorise both clients as ‘balanced’ while offering two separate products which reflect their different preferences as revealed by the RiskTailors questionnaire. For example, the questionnaire might reveal that the first client would be better served by the RiskTailors Balanced, Risk Focused portfolio, while the second client would benefit more from the RiskTailors Balanced, Smooth portfolio.
Products that adapt to market conditions
The problem
One client in a traditional ‘Balanced’ portfolio product has become more upbeat about market conditions. However, her financial advisor is reluctant to switch her onto a higher risk and higher return product based on the risk profiling questionnaire the client took a few months back.
Our solution
All RiskTailors portfolios are built around the idea that markets routinely move between risk-on and risk-off periods. An IFA using RiskTailors products can easily explain how the client portfolio reflects current market and macroeconomic conditions. In addition, the RiskTailors ‘Balanced’ portfolios are not solely focused on matching an appropriate level of market volatility, but incorporate multiple dimensions of investment preferences.