Both the long and short form risk tolerance questionnaires have been rescaled for the 3.0 update, which includes revisions to a number of questions.
The FinaMetrica database was analysed in detail by Dr Myrsini Katsikatsou, research fellow at the London School of Economics, Department of Statistics. The analysis commenced in mid-2016 and was completed mid-2017. More than 500,000 completed risk tolerance tests were analysed.
The company, founded by Paul Resnik, released a report on the update
It stated: “Every three to five years, in conjunction with our academic advisers, we review the integrity of our test questions, answers, scores and reports. This helps take into account any changes in interpretation by those answering our tests and to improve opportunities for advisors to talk with their clients.
“The objective of the analysis was to review the FinaMetrica risk tolerance scales and the scoring algorithms to ensure they are relevant to the contemporary data and update them if necessary.”
After the review, risk tolerance tests have been rescaled and the scores fine-tuned
The differences in scales are “not practically material in the vast majority of cases”, the firm said, but are “nonetheless, in keeping with our objective of maintaining the highest standards”.
Among the changes are:
- Questions 11, 23 and 24 updated to reflect more contemporary situations.
- A single global scale adopted for ease of comparison.
- A new employment section added to the risk group descriptions.
- A new Investment Snapshot added to the Portfolio Gap Analysis.
- Asset Allocation Mappings marginally rescaled.