I spend a fair amount of time on the road with my job, usually visiting advisers in their offices. This week my travels are a little different, with myself and my colleague, Bruce Ely-Johnston, both travelling up to Harrogate on Thursday (13 September 2018) where we’re one of the supporting firms behind Money Marketing Interactive. This event will bring around 150 advisers, support staff and providers together to discuss some of the burning topics of the day.

One of the topics being covered is how to measure attitude to risk. This is a topic very close to our hearts at PortfolioMetrix. Many of the tools used by advisers for measuring risk are little more than a tick-box exercise, providing the basics that will satisfy the regulator. But for advisers and planners who want to really understand their clients – and help their clients to understand themselves when it comes to the emotional side of investment – it’s necessary to go a little deeper.

This is where behavioural finance comes in. It uses psychology-based theories to help determine how people will behave in different financial circumstances, such as when there’s a dramatic fall in stock markets. This is even more important since MiFID II brought in the 10% drop rule, which means clients have to be immediately alerted to any fall in their portfolios of 10% or more – an alarming message to receive for any investor!

Using behavioural finance techniques in client fact-finds not only enables advisers to gain valuable insights into how to construct investment portfolios, it also helps them to coach their clients to avoid them making emotional decisions that can damage well planned investment strategies designed to deliver the required results over the longer term.

If you’d like to know more about behavioural finance and how it’s integral to the PortfolioMetrix risk profiling tools please do get in touch. Better still, if you’re attending Money Marketing Interactive this Thursday in Harrogate, come and see Bruce or me on our stand and we can show you how you can easily benefit from a more scientific approach to risk profiling.