Where risk tolerance describes a client’s posture toward risking losses for the chance at gains, loss aversion describes a client’s reaction when incurring losses. These are separate and distinct aspects of a client’s risk preferences—each has its own mathematical definition according to economics. And both are critical to understand when gauging a client’s risk preferences […]
The science behind TrueProfile (or as Shachar calls it in the video above, the “intel inside”) is grounded in microeconomic theory and econometrics. It is based on 15 years of Shachar’s academic research, published in top scientific journals around the world and tested across the most robust research panels in academia.
TrueProfile uses a client’s decisions […]
Risk tolerance measures the portion of money your client was willing to put at risk for potential gains. Risk tolerance is one of the critical components of understanding a client’s complete risk profile.
Loss aversion measures your client’s sensitivity to losses, should they occur. Loss aversion is independent of your client’s risk tolerance, and is one of the critical components of understanding a client’s complete risk profile.
Decision consistency measures a client’s “economic rationality”–in other words, how well-ordered your client’s risk preferences are. Clients with low decision consistency scores show preferences that contradict each other, and are an indicator that the client needs extra education and care in the advice process.
TrueProfile reveals client preferences by having clients make simple trade-off decisions. By removing interpretation errors and ambiguous language, we are able to distill clients’ preferences down to the simplest form. Using groundbreaking decision science and behavioural economics, TrueProfile is able to precisely measure the risk present in decisions, and mathematically map this to portfolio options. By having math […]
TrueProfile plots your portfolio models along the efficient frontier. Using your client’s unique risk profile, TrueProfile measures how closely your client’s preferences correlate with the investments you offer.
Watch this video on the Science of Fitting Portfolios to learn more.
Clients can have low decision consistency for 2 reasons:
They were multi-tasking–ask the client to focus on the activity and re-profileThey do not have well formed preferences–spend some time educating these kinds of clients, and then re-profile them. If they continue to show inconsistent preferences like this, re-consider whether you could or should serve that client. […]
Your clients will be able to access TrueProfile’s profiling activities through the web browser on their preferred smartphone, tablet, or computer. You are able to invite your clients to complete the profiling activities through an email invitation, through a unique game link that TrueProfile generates (which you may paste into your own email), or face-to-face with […]
TrueProfile maps to whichever portfolio models you choose. During the on boarding setup wizard, you will be prompted to add your investment models, select TrueProfile’s default models, or disable portfolio mapping. By default, TrueProfile maps to MSCI investment models.