What client behavior risks do you address when building and managing a financial plan for your clients? Do you limit your risk analysis to investment risks? Or do you address a broader range of investment risks?
When people talk about risk in the financial planning process they are usually thinking about the investment risks on a singular and situational basis. However, the problem is that they are not thinking about all of the other financial decision-making and relationship risks that can equally, or sometimes to a greater degree, influence the financial planning outcome. Financial planning at a holistic level is more than being solely about investment management and investment products.
Since 1999, we have advocated the development of holistic financial planning that can assist clients to achieve their life and financial goals. We believe that this broader viewpoint embraces far more than just investment risk and moves the paradigm to financial personality. It also necessitates the objective and reliable measurement of how personal financial clients will behave on a long term basis and points very clearly towards educating them on how their behaviors will impact on their financial wellbeing and relationships.
In addition, through our Financial DNA Summary Report which accompanies this report we provide more information for assisting advisors to interpret and facilitate the client through financial planning discovery. In this report, we provide insights on the client’s Investment Portfolio Parameters based on their natural level of emotional comfort in taking investment risk. This information can be easily linked to the advisors investment allocation model.
- The questionnaire models only allowed for uncovering situational investment risk propensity and not investment risk tolerance, financial risk behaviors and relationship risk behaviors;
- The situational nature of the questionnaire format inherently leading to the data not being reliable for long term portfolio development;
- Even if the results were consistent over time they would nevertheless be skewed to the high side because of the scientifically proven human tendency for the participant to “self-promote” by scoring themselves higher than what they are in reality.