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In early 2018 at Dynamic Planner, we launched a significant improvement to our already market-leading risk profiling service – a new 15-question attitude to risk questionnaire.
Feedback from our thousands of users in the 24 months since has been very positive – and usage of the questionnaire has only grown and risen. All good then.
But why precisely is our 15-question questionnaire better? What problems does it particularly address? Below, we look at the story of the questionnaire, the very real science behind it and how it can be refined even further in future.
Many attitude to risk (ATR) questionnaires are devised in a particular way – which can mean they don’t necessarily have real psychological rigour behind them. They can be devised in a very mathematical way. When we, in partnership with Chris Brooks, Professor of Finance, at Henley Business School, devised the 15-question ATR, we wanted it to have a very sound psychological basis.
Our 15-question ATR looks into why we feel the way we do and makes sure questions carefully cover every facet of an individual’s personality – emotional, cognitive and behavioural – alongside driving, constraining and enabling elements of a client’s personality. By covering each of those areas, a much more theoretically robust picture is produced of why someone’s attitude to risk is the way it is.
In practical terms, wording in the questions is clearer in the 15-question ATR, which means clients of advice firms stop much less frequently while they are completing it and ask, ‘I’m not sure what that means’. In that sense, the 15-question ATR has much less chance of being misunderstood and therefore produces fewer inconsistencies in a client’s answers. Fundamentally then, the 15-question ATR is more sound and is quicker to complete. Win-win.
When the 15-question ATR was first being created, in partnership with Henley Business School, a lot of effort was focused on making questions as easy to read as possible. As a result, there are no double negatives in their wording, which can make a questionnaire appear unnecessarily complex to a client. The client also does not require specialist knowledge to complete it.
Other questionnaires can include multiple, what are termed, ‘killer’ questions, which can elicit an indisputable conclusion from a client: for example, ‘I would never take risk with money’. If a client ‘strongly agrees’ to a question like that – or even ‘agrees’ – any regulator looking at that answer cold can arguably only draw one conclusion about a client’s attitude to risk.
Such inconsistencies are flagged for the adviser to address once the client completes the questionnaire. That cannot happen with the 15-question ATR, because it doesn’t contain those ‘killer’ questions. Of course, there will always occasionally be inconsistencies from a client if they answer questions out of kilter. However, those inconsistencies are dramatically reduced with the 15-question ATR. For example, 95% of clients completing the 15-question questionnaire had one or zero inconsistencies flagged to the adviser and 81% of clients had zero inconsistencies, while only 1% had three or more inconsistencies flagged.
If a questionnaire regularly flags multiple inconsistencies from a client there is a natural danger then that the adviser can miss a potentially important one. Advisers naturally prefer the 15-question ATR because it dramatically reduces those inconsistencies. Anecdotally, we heard from one Dynamic Planner user and adviser, who said that using the 15-question ATR was saving them approximately 15 minutes of time per client, which quickly adds up when you consider all of a firm’s clients.
Risk profiling, of course, is a larger process and attitude to risk represents just one element of that. At Dynamic Planner, we, of course, harboured some concerns before introducing the 15-question ATR, because, by implication, it said that what we had been doing prior, up to that point, with the 10 and 20-question questionnaires, was wrong.
But we believed in what we were doing; we communicated it clearly and openly with Dynamic Planner users ahead of time; and the feedback we have received in the 24 months-plus since has been only positive and unanimously allayed those natural concerns pre-launch in January 2018.
Of course, things get better in business constantly. It doesn’t necessarily mean that what preceded it was wrong or bad. With the 15-question ATR and because of the close nature of our partnership with Henley Business School, we can continually monitor data from clients completing the questionnaire. If then, there are any questions which don’t appear to be working as they should – or as we predict – we can alter and develop wording accordingly. That is not only good business sense but simple common sense we all want to see and experience in our working lives. We should never be afraid of that.
For more information on how Dynamic Planner can help your firm, book a demo with one of our team.