Narrative Fallacy Financial Advisors

"The narrative fallacy addresses our limited ability to look at sequences of facts without weaving an explanation into them, or, equivalently, forcing a logical link, an arrow of relationship upon them. Explanations bind facts together. They make them all the more easily remembered; they help them make more sense. Where this propensity can go wrong ...

3 Things Your Clients Must Understand Before You Assess Their Risk Tolerance

Risk Tolerance Client Education Time Horizon

I recently had a discussion on Facebook with two financial advisors about risk tolerance questionnaires. The advisors expressed their frustrations with managing client behaviour. In one advisor’s words “there is an emotional element that is difficult to quantify” in questionnaires. Pocket Risk helps here but we agreed a certain level of client education is necessary ...

What Is Risk Profiling? Part 2: Let’s Stop Debating Definitions

What Is Risk Profiling

In my previous article “What Is Risk Profiling – Part 1”, I showed how you can’t talk about risk profiling, without understanding risk. And that the definition of risk has changed over the centuries due to academic research and human experience. The modern consensus is that risk is a mathematical and psychological construct. This consensus is built ...

What Is Risk Profiling? Part 1: Over 362 Years Of History

Blaise Pascal

Risk profiling is the process of understanding how much risk is necessary for a client to achieve their financial goals. But this only begs the question – What is risk? The challenge for financial advisors is that the definition of risk keeps changing as research expands. In order to understand risk profiling, you have to start with the history ...