Amping up Client Investing Risk Profiling

Note from the Publisher:  It’s unknown at present if DOL Fiduciary is indeed going to come into play, now that Donald Trump – who is against added regulatory oversight – has become America’s President-Elect.  If it remains in effect, the onus falls on financial advisors to more carefully steer clients to investments that are appropriate for them and meet their risk profiles.  Pardon  my aside for a moment – why has that NOT ALWAYS been the case?  But I digress.  Anyway, in 2018 the Financial Instruments Directive ((MiFID II) will come into force in the EU (something akin to DOL Fiduciary), and require appropirate risk profiling for investors as well. 

So – to help address that risk management directive, the French startup Neuroprofiler has developed  an online suitability test based on behavioral finance and psychological investing profiles. 

“……….Existing suitability tests are mostly done through static verbal questionnaires, often not even online. Next to questions checking the investors’ knowledge of financial products, these tests ask them to self-assess their risk-taking behavior using simple methods such as ratings and word association. These rudimentary methods fall short of uncovering the true “risk tolerance and ability to bear losses” that the regulator requires be investigated. In fact, research shows that only 10% of existing tests are based on scientific research and only 50% are compliant.

By contrast, Neuroprofiler’s suitability testing:

  • Complies with MiFID suitability testing requirements.
  • Provides an online gaming experience.
  • Quickly reveals a customer’s unique utility functions:
  • Provides insightful explanations:

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……..Neuroprofiler required more than three years of research by its co-founders Tiphaine Saltini and Julien Revelle. 
The Neuroprofiler application is currently used as a pilot at a subsidiary of BPCE, one the French top 10 banks.”

Source: Crowdfundinsider