Behavioral Risk Survey

Our High-Level Assessment of Risk Tolerance

The Behavioral Risk Survey takes less than 10 minutes to complete and surfaces an investor’s willingness to take risk on a scale of 1-5 while revealing insights on their potential behavioral biases and investment preferences. Our dynamic, responsive survey features 15-17 risk questions and 7-8 behavioral bias questions, adjusted in real time to the investor’s previous responses. As each question is answered, the survey selects the best-next question to most accurately determine the investor’s:

Willingness to Take Risk

Loss Tolerance: What would they do if their investments lost money over a specific period?

Volatility: How would they proceed with certain hypothetical and historical portfolios with varying levels of volatility?

Attitudes Toward Investment

Tradeoff: Which is more important to them—avoiding loss or earning high returns?

Self-Assessment: Which investment scenarios or descriptions most closely describes them?

Leverage: Is their attitude toward leverage consistent with their risk tolerance?

Propensities Toward Biases

Emotional vs. Cognitive: Behavioral economics outlines two types of biases, emotional and cognitive. Emotional biases come from “impulse” or “intuition,” while cognitive biases come from errors in calculation or faulty reasoning. Knowing if a client is more emotionally or cognitively biased helps refine communication.

Specific Biases: Identifying specific behavioral biases to expect (e.g. loss aversion, confirmation, status quo, etc.) for each client can help advisors navigate relationships more smoothly, explain concepts more clearly, and anticipate certain outcomes. This may even inform which portfolios or investment opportunities you present to individual clients.

Investor Persona

We categorize them into one of our four proprietary investor personas:

Guardian, Inspector, Outlaw, & Chief

Personas guide the way we frame messaging and personalize communication for each contact. They help us surface tips to the advisor for better face-to-face communication and direct interaction with clients, and even impact how new information is presented to clients visually.

Our Approach

The Finworx Behavioral Risk Survey was created based on industry best practices and psychometric principles. Results are constantly monitored to identify new opportunities for adjustment and improvement.

Our questions were carefully designed with the following goals:

  • Reduce the effect of framing on the investor’s response
  • Ensure one “wrong” answer does not skew an investor’s results
  • Adjust questions dynamically based on investor responses
  • Determine the investor’s willingness to take risk with as much accuracy as possible

The results of the survey are revealed in two ways:

Client-facing output shows the client their risk score and a few tips relevant to them (based on their survey answers).

Advisor-facing output gives a detailed breakdown of how the investor answered each question, highlights any inconsistencies in the client’s answers, reveals the client’s investor persona, and details some potential biases the client may exhibit.

Ultimately, this survey helps you truly know your client. And, if administered regularly, it will help you monitor any potential changes in the client’s attitude toward risk.

But knowing your client is only the first step.

We provide communication guidelines for our personas with research-based methods for advising each type of client, given their unique risk preferences and biases. Our library is filled with persona-based content on financial planning topics and market-related commentary to help you take full advantage of the insights surfaced in the Behavioral Risk Survey.

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