By conflating risk tolerance with behavioural risk attitudes, advisers will potentially replicate (or optimise for) all the silly things investors do already, rather than helping to mitigate and control investors’ more-destructive tendencies.A common failure of risk profilers is to try to elicit separate measures of tolerance for different subcomponents of a client’s overall wealth.If we genuinely want to determine the right amount of risk, it is not sufficient just to measure risk tolerance. It is also not sufficient to supplement this with a narrow model of risk capacity. We also need to help people understand, articulate and dynamically adapt their future goals, plans and aspirations over their journey.
The biggest barrier to social impact investing is low awareness of its opportunities to align investment goals with social goals.Some investors prefer to consciously trade-off social good and financial outcomes, thereby 'buying' the maximum social good with their wealth.Communications should focus on making investors more comfortable with social impact investing, including reducing the perceptions of the barriers associated with it.
The FT Advisor ran a story on Suitability and the advice process under MiFID II yesterday The article outlined the requirement under the new directive of assessing suitability every time advice is provided, retaining a record of the report, and conducting an annual suitability review. It goes on to assert that MiFID II will also […]