How to Proactively Utilise a Client's Risk Profile

Once you know a client’s Attitude to Risk and Sensitivity to Loss, you can utilize this data to proactively offer them advice across market conditions, as well as personalise the marketing and communications you send to each client.

Below is a distribution of 10,000 real client risk profiles, with Sensitivity to Loss plotted on the x-axis and Attitude to Risk plotted on the y-axis.

Identifying where each of your clients sits in this distribution is useful for proactively tailoring the advice you give them.

For instance, clients who sit in the green-shaded area in the top left corner of the chart have a high Attitude to Risk score and a Low Sensitivity to Loss score, meaning that they are not likely to be disturbed by market volatility and are prime candidates to call about initiating new investments when the market is down.

Clients in the yellow-shaded area are comfortable taking on a high amount of risk in their investments, but also feel losses acutely when the market drops. With clients like these, it is critical to address their high Sensitivity to Loss when selecting a portfolio. Even though their Attitude to Risk would indicate that they are better suited for a growth-oriented portfolio, it is important to properly frame expectations of market volatility if they were to pursue an aggressive investment strategy.

Clients in the blue-shaded area have low Attitude to Risk and Sensitivity to Loss scores, meaning they are most comfortable in conservative or preservation portfolios. Clients with this risk profile will likely be bothered by market volatility and require extra attention and reassurance from you during market declines. These clients are also prime candidate for insurance and annuity products, if your firm offers them.

Identifying where each of clients sits in this distribution is useful for proactively tailoring the advice you give them. With this data, you can prioritise which clients you should call first during market volatility, as well as personalise the marketing and communications you send to each client based on their risk profiles. 

To see example client personas that sit in each shaded area, check out this article.

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