We’ve taken care to provide enough context in the game experience itself for most clients to feel comfortable with what they are doing and why. However, you may find that certain clients need a bit more explanation. Here are five things clients should know as they play through TrueProfile for the first time.
Note: these talking points are phrased from the advisor’s point-of-view.
1) Actions speak louder than words. [Why]
We know from behavioral economics research that people have a very difficult time saying in words what their preferences are when it comes to ambiguous topics like risk tolerance or loss aversion. New techniques from decision science let clients reveal their true preferences by playing through gamified decision scenarios.
2) Your revealed preferences will help us understand you with greater precision and pinpoint suitable investments for you. [What we’ll do with the results]
Every client has unique preferences when it comes to risk. By letting us observe the decisions you make, we’ll be able to have a richer discussion about your attitudes toward risk and reward. We may well discover new insights about you that wouldn’t otherwise have been possible. As well, it will let us locate your investment comfort zone, which will help us pinpoint suitable investments for you.
3) Think of this activity as stepping into a decision simulator. [How it works]
You will be presented with a series of risk/reward scenarios. Your job in each scenario is to choose the amount of risk and reward that you are comfortable taking. There are no wrong answers.
Based on how your decisions change from scenario to scenario, we’ll be able to use advanced mathematics to pinpoint your risk comfort zone.
4) The scenarios are simplified, and each one is different—by design. [How it works]
By design, the scenarios are simple—there is no financial or investment jargon. That’s because we want to get a clean read of your risk preferences, free from the bias of investment context or how much financial acumen you have.
Each scenario stands on its own—you don’t need to think of the scenarios as a series of investments. Some scenarios appear more normal, and others more extreme. By observing your decisions in all conditions, we gain a more precise estimate of your comfort zone.
5) This diagnostic is based on Nobel Prize winning work in economics and has been validated on the most robust population panels available. [Why we trust the results]
Clients who would like to learn more about the science of revealed preferences can read more here: https://www.trueprofile.com/the-science/