Risk profiling and financial planning tool Dynamic Planner has redesigned its risk assessment questionnaire to better meet Mifid II requirements around suitability.
The process, which was launched at the firm’s annual conference on Wednesday (31 January), will now include 15 psychometric attitude to risk questions and will focus less on people’s general understanding of finance.
The questionnaire was written in collaboration with academics from the International Capital Market Association Centre at Henley Business School.
The new questions should be easier for clients to understand, Dynamic Planner says, and will relate less to specific investment choices.
Rather than being perceived as a test of financial knowledge, the questions will now be reworked to show pure attitude to risk.
Accumulation and decumulation stages will be accounted for, as will both existing and new clients.
Adviser can still use the previous questionnaires but also use the new one.
DT, which runs Dynamic Planner, has conducted research to find 93 per cent of clients can be expected to move by no more than one risk level after using the new questionnaire while 50 per cent of clients can be expected to remain the same.
This compares with 41 per cent of people using the existing questionnaires whose risk profiles move over several years.
Dynamic Planner head of intermediary account management James Smith says: “This new questionnaire is an evolution of our existing profile process, and is the result of 16 months of research, development and user feedback. It will help investment managers and professionals to fulfil their Mifid II requirements for suitability and appropriateness.”
Independent consultant and former FCA director Rory Percival warned advisers last year about the discrepancies between and limitations of risk profiling tools.
In a report he produced in September 2017, he assessed six tools: A2Risk, EValue, Dynamic Planner, FinaMetrica, Morningstar and Oxford Risk.
Percival said at the time: “Advisers shouldn’t solely rely on the outcome of the tools, and assume the job done.
“Under Mifid II, advisers must review these assessments and ensure they are fit for purpose. Part of our aim in producing this report is to help advisers determine whether an assessment or recommended portfolio is fit for purpose. It should also enable advisers to identify and mitigate potential risks when using these tools.”