How to classify clients using psychometrics

The vast majority of financial advisers use some form of ‘risk’ questionnaire with their clients; usually one which has been sourced from their software supplier, compliance department, or which they have developed themselves. Recent FSA guidance however suggests that many advisers may not have completed an appropriate level of due diligence on such tests, which may leave them and their clients exposed. A small number of advisers even claim that their ‘years of experience’ enables them to forecast an investor’s risk tolerance. Evidence of this was seen quite recently in BBC’s Panorama...