Understanding Decision Consistency

Our Decision Consistency flag confirms when a client has (or has not) a coherent understanding of risk and reward trade-offs.

Clients with low Decision Consistency make decisions in the Risk Activity that contradict each other. Having a low Decision Consistency indicates that the client needs extra education and care in the advice process.

What is Decision Consistency

How can I recognise if my clients have inconsistent decisions?

We indicate inconsistent decisions with a flag on the client’s profile screen. This means they did not have a coherent understanding of risk and reward in the Risk Activity.

As shown, an investor with inconsistent decision making has no discernible pattern between the rounds, and this gives us low confidence that we have understood their risk preferences.

Bonus: Having inconsistent decisions has been shown to have a negative impact on net worth at retirement when compared to those with the same lifetime income. This could be due to changing goals causing long-term strategies to never come to fruition.

We also know that only 1% of investors have inconsistent decision making. Inconsistent decision patterns occur across all Attitude to Risk and Sensitivity to Loss combinations and income groups, meaning the only way to identify clients with inconsistent decision-making is to risk-profile them and see how they make decisions in the risk activity.

As an adviser, it is important to identify these clients early in the advice process and intervene as you see best. We recommend providing additional coaching and support throughout the advice process. You may also want to have an educative conversation about risk and reward and then re-profile the client to see if their decisions become more consistent.

Did this answer your question?

If not, please feel free to reach out to us at customer-support@capitalpreferences.com