The Next-Gen Risk Assessment pairs mathematical sophistication with an elegant user experience designed to help investors truly understand the contextual relationships between investment risk and reward. In this article, you'll learn how to implement the Next-Gen Risk Assessment into your existing workflow.
To opt-in to the Next-Gen Risk Assessment click Menu > Settings > Early Access and toggle on Next-Gen Risk Assessment. Opting in will make the Next-Gen Risk Assessment your default questionnaire type and, but legacy options are still available for clients and prospects. Any lead-gen links you've generated will move to the Next-Gen workflow once you've opted in.
Note: If you’re new to Riskalyze or would like a refresher, we recommend reading the Capturing a Risk Number knowledge base article before proceeding further. This article will give you a general understanding of how to access and send the Risk Questionnaire to your clients or prospects.
In This Article:
Investors will begin by answering some fact-finding questions:
- Goals - investors can select from a list of pre-defined goals or enter up to 3 custom goals
- Basic notes on their financial status
- Investment Amount
- Birthdate and Retirement Age
Prior to the risk assessment section, investors will answer two questions designed to gauge their general financial sentiment. These questions ask them how they feel about the market and their financial future and provides key insights to your client’s emotional connection tied to their investments.
Pro Tip: Use Check-ins, our automated behavioral tool, to keep a pulse on your clients between review meetings.
Prospect Theory and behavioral psychology tell us that the pain of loss is at least twice as powerful as the potential pleasure that might be derived from gains. The risk assessment portion focuses on the risk/reward “comfort zone” over the next six months based on the investment amount identified by the investor. This approach coaches and educates the investor in concepts like downside loss potential and the 95% Historical Range™ as they move toward their Risk Number®. At this point, it’s crucial for an investor to be comfortable with the full range of both the upside and downside outcomes presented.*
This question can be a great entry point into having this crucial conversation around investor behavior as investors work to refine their risk tolerance through the next large-loss scenario-focused within the bounds of the initial comfort zone identified earlier.
Investors will continue to choose between risk/reward scenarios and choose between an option to invest within the bounds of their comfort zone or sacrifice some potential upside in favor of a certain outcome. This process fosters a deep dive into the investor’s psyche around how they really feel about risk in relation to their actual investment portfolio.
Once investors are presented with their calculated result, they’ll have the option to fine-tune their final Risk Number up or down before confirming their final result by clicking “Yes That Feels Like Me.”
Once an investor has completed a risk assessment, you’ll want to confirm the Risk Number associated with their client profile by walking through the sets laid out in our Reviewing a Clients Risk Number knowledge base article.
What determines the upside/downside ratio on the Risk/Reward screen?
The upside/downside figures along the slider are actually the same numbers you'd see when selecting a Risk Target. In both instances (slider up/down ratio and 6-month risk range associated with Risk Target Risk Numbers) Riskalyze effectively optimizes a sample portfolio behind the scenes using equity, fixed income, and cash allocations to generate realistic figures. For example, a 6-month range of -10% to +15% might be the product of a 55% equity, 5 % cash, 40% fixed income allocation as optimized in a sample portfolio.