Case studies

Most current risk profiling solutions rely either on self-diagnosis by the investor or on a relatively high level of investment knowledge or concepts. Developed with all segments of the population in mind, Dynamic Risk Profiler requires no prior knowledge of financial services terms or quantification of acceptable loss and is therefore suitable for the entire market, regardless of their level of financial education. Dynamic Risk Profiler has been developed for UK advisers and benchmarked against the UK population to ensure its suitability for the UK and its statistical reliability.

Lighthouse Group

Lighthouse Group, one of the UK’s largest Independent Financial Adviser groups and pension scheme administrators, announced the immediate launch of a major new Client Risk Matching Initiative for IFAs and their clients on the 12 June 2007.

From the Lighthouse press release:

The initiative means that Lighthouse is now in a position to offer its advisers a psychometric fact finding process, designed by Distribution Technology Ltd, which uses behavioural finance principles to create a client risk rating. This is then replicated by an investment with precisely the same risk profile in terms of targeted volatility on an ongoing, quarterly updated, basis. The underlying investments are a range of unfettered fund of funds recently launched by F&C Management Ltd (F&C) under the “Lifestyle” banner. This is the only offering of its kind currently available in the UK to provide an automated asset mix tailored to fit the risk profiles of specific categories of investor as determined by the fact finding process.

Park Row Associates

Park Row Associates, a Royal Liver Company, one of the UK’s largest financial services distributors and one of Distribution Technology’s oldest customers, have – initially – implemented Dynamic Risk Profiler in their multi-tied division, with the option for roll-out to their independent advisers at a later stage.

John Butterfield, Marketing & Communications Manager, Park Row, commented:

Distribution Technology has a reputation for market-leading advice technology. Dynamic Risk Profiler is being used as a core part of the advice process; bringing consistency to the business in terms of risk profiling and asset allocation. This will support the business in its aim to meet and beat the regulator’s requirements under TCF.

Uniquely, DT’s Dynamic Risk Profiler allows advisers to select the length of questionnaire they wish to use, trading off time spent in asking profiling questions and questionnaire reliability. Three questionnaires are available with 5, 18 or 24 questions each providing a three page report for the customer explaining their profile based on the research. The flexible nature of Dynamic Risk Profiler means that there is a questionnaire to suit every investor. A balance can be struck between length of questionnaire and accuracy, using a shorter questionnaire for simpler cases and a longer questionnaire for more complex, high net worth clients.