3 Elements of a Great Risk Profile Questionnaire - Pocket Risk


Helping Financial Advisors Know Their Clients – Risk Profiling, Client Psychology, Behavioral Finance, Compliance

3 Elements of a Great Risk Profile Questionnaire

What makes a great risk profile questionnaire? With so many opinions and vested interests its challenging to know what to ask your clients. The FSA certainly has their opinion, so do researchers and clients. We have our opinion and it’s not just a laundry list of Pocket Risk’s features. Below we take a look at the questions you must ask your clients and what you should expect from your software. 

1. Give your clients real life examples

It will not surprise you that many people find managing their finances to be a boring task. Financial matters are presented in a dry and abstract manner. This not only runs the risk of boredom but confusion and error. Real life examples in a risk profile questionnaire bring the subject to life and allow you to glean new information. Take the two questions below as an example…

Question A – Would you sell an investment you bought that lost 15% of its value in one year?

Question B – Would you sell a buy-to-let investment property that you bought if it lost 15% of its value in one year?

Mathematically speaking these two questions are asking exactly the same but the answers will vary wildly depending on a client’s opinion about property investment. Real life examples in risk profile questionnaires unearth insights abstract questions cannot. They help you better understand your clients.

2. Give your clients a real choice

Almost all software based risk profile questionnaires give clients a multiple choice option to answer questions. Multiple choice answers are a good thing. They ensure consistency and objectivity when measuring someone’s profile. However, if a questionnaire does not give a wide range of possible answers there is a risk that clients could be shoehorned into a response that doesn’t reflect their true feelings.

Great questionnaires give clients a wide range of possible answers. We recommend five as minimum for most questions but have opted for seven on most of our questions. Any more than seven options and clients will find it difficult to choose as they become overwhelmed with possible responses. Too much choice can be a bad thing.

3. Easy to use 

“Easy to use” is a commonly used phrase to describe software but rarely do the words meet reality. Easy to use can mean many things. Here is what financial you should look out for:

Easy for You – Is it easy to set up and manage? Can you use it and collaborate with colleagues without reading a 10-page manual? If it’s a paid product do they get a free trial?

Easy for Your Clients – Can they complete the questionnaire without having to email you for help? When you discuss the final report with your clients, is it easy fir them to understand?

The software should do its job and get out of the way so you can focus on your business. For this to happen it must be usable.

4. Bonus: Fun

Risk profiling is one of the first touch points clients have with a financial advisory firm. This should be a positive experience and set a tone for the rest of the relationship. It could just be that I am a finance geek but I see no reason why the process cannot be both informative and enjoyable. Once you have ticked all the necessary boxes (such as compliance, usability and robustness) why not shoot for something clients will love to use.