Lindsay, Ont.-based PlanPlus Inc., a financial and investment planning software firm, has collaborated with an Australian company to release a new risk profiling and suitability tool for financial advisors and firms.
FinaMetrica, a firm with a globally supported psychometric risk tolerance test for advisors, has provided a 25-question risk test for a number of years that is recognized as the benchmark for a proper measure of a client’s tolerance for risk as a psychological attribute.
“Research has shown that most risk questionnaires are simply portfolio pickers and do not actually measure the risk tolerance of a client,” said Paul Resnik, co-founder of FinaMetrica. “By combining our new test with PlanPlus Planit’s portfolio and goal planning I think we have created the best solution available for advisors and firms today to ensure they understand and provide advice suitable to the client.”
Even though the FinaMetrica test was world-recognized, some advisors and firms were intimidated by having to answer 25 questions”, said Shawn Brayman, president of PlanPlus.
“We worked with FinaMetrica to trim this to 12 questions but retained the highest degrees of reliability. We then went further with individual back-tests where we compare the way a client answers each individual question compared to their peers in the same risk group. We are able to point out when a client answers a question erratically and warn the client and advisor that they should look more closely at the client understanding and expectations.”
Investment Planning Counsel (IPC) was the first company in Canada to make this new technology available to their advisors, rolling it our with the new Version 5.15 of PlanPlus Planit they released to their over 1000 advisors.
Both PlanPlus Planit and FinaMetrica provide their solutions in many languages and countries. Although first available in Canada, PlanPlus intends to roll out the tool to its customers in over 30 countries over the summer.