Adviser estimates

From Planipedia

Financial advisers do not have a good understanding of their clients’ risk tolerance. Statistical studies (Elsayed & Martin [1998], Roszkowski & Grable [2005]) typically show correlations of 0.4 or less between financial advisers’ estimates and measured risk tolerances. Correlations of this order give errors of two or more standard deviations for one in six cases. This means that financial advisers would be more accurate if they made no attempt to assess clients’ risk tolerance and simply assumed all clients were average!

Elsayed, H. and Martin, J. "Survey of Financial Risk Tolerance –Australian Technical Report." (Unpublished) (1998), www.riskprofiling.com/Downloads/SOFRT_Report.pdf.

Roszkowski, M.J. and Grable "Gender Stereotypes in Advisors' Clinical Judgments of Financial Risk Tolerance: Objects in the Mirror Are Closer than They Appear." Journal of Behavioural Finance, 6(4), (2005), pp. 181-191.

Roszkowski, M.J. and Grable "Estimating Risk Tolerance: The Degree of Accuracy and the Paramorphic Representations of the Estimate." Association for Financial Counseling and Planning Education, (2005).

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