Getting your Compliance Team Across the Risk Activity

Capital Preferences’ Risk Activity is a proprietary interactive game designed to measure individuals’ estimated risk preferences through hypothetical tradeoff scenarios and similar exercises.

This differs from the traditional method - typically a risk tolerance questionnaire - used by financial advisers to understand their clients' risk preferences and comply with Australia's legal requirements for understanding the clients' preferences prior to giving financial advice.

Rather than asking clients about their risk preferences, our solutions enable clients to demonstrate their risk preferences by making simulated risk vs. reward investment decisions across varying levels of investment opportunity.

By having clients make a series of tradeoffs at varying levels of investment risk and opportunity, we are able to calculate their Attitude to Risk and Sensitivity to Loss scores, which tell us how clients respond to different portfolio outcomes when investing their wealth. This is why the size of the green triangle changes across the six different scenarios, to stress-test the client’s risk preferences across market conditions.

Using the client’s Attitude to Risk and Sensitivity to Loss scores, we calculate where the client would be located on an efficient frontier of investment options, given your firm's capital market assumptions and model portfolios, and provide a Risk Comfort Score for each model portfolio on the frontier. This Comfort Match Score is a measure of how much utility a client attains from a model portfolio, relative to the other investment options.

Our solutions are grounded in rigorous methodology from decades of decision science and behavioural economics research from our academic co-founders to deliver consistency in digital and hybrid channels, and to meet the highest standards of compliance.

We continuously monitor the ASIC website for updates to ensure that we are compliant at all times. This includes adhering to the timeline for reforms and compliance with the professional standards as are applicable to us and to our clients for whom we are service providers. In addition, we also independently review all new legislative and regulatory changes to ensure compliance.

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