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Risk profiling specialist Oxford Risk has launched a set of client suitability and behavioural-insight tools which it claims are pioneering.
The Compass suitability tools are aimed at helping advisers understand their clients better and help match them to suitable investments.
According to the company, they account for an investor’s psychology, circumstances, emotions, and financial understanding.
Marcus Quierin, chief executive of Oxford Risk, said: "A suitability approach that pays proper scientific attention to each investor’s unique circumstances and the behaviours they employ in the search for emotional comfort, is long overdue.
"I’m pleased to be able to announce that we’re launching a full set of tools to do just this, and moreover one that is designed to be built into an adviser’s existing systems and not bolted on.
"We see suitability as a chance to provide a supporting structure within which advisers can operate better, rather than obstacles that get in their way."
The Compass tools include a psychometric risk-tolerance assessment which Oxford Risk claimed was the most scientifically-rigorous one available, and a knowledge and experience assessment.
It also includes what Oxford Risk claims is the industry’s only dynamic risk capacity calculation.
Greg Davies, head of behavioural finance at Oxford Risk, said: "Compass moves beyond a narrow view of what it means to own a good investment portfolio, to a wider view of what it means to be a good investor.
"Just as it would be remiss to prescribe medical care without considering their lifestyle and goals, it is remiss when giving financial advice to focus on investment solutions without giving the same attention to the psychology and emotional comfort of the investor.
"Good investment outcomes require managing the investor, not just managing investments."
Oxford Risk is a spin-out of Oxford University which uses behavioural science to study suitability. Its clients include robo-adviser Nutmeg, Standard Life, HSBC and Brewin Dolphin.
Simon Torry, a chartered financial planner with SRC Wealth Management, said: "Attitude to risk questionnaires are a way of getting clients thinking about risk but they have significant limitations.
"I think capacity for loss is more relevant and that is a bigger influencer on what the client should be doing with their money. If someone has got a high attitude to risk but a low capacity for loss then they shouldn't be taking on any investment risk.
"We tend to send a risk questionnaire to a client initially and we will then discuss the results with them. It is really only through a conversation that you then are able to get a suitable risk profile."
damian.fantato@ft.com
