This guide provides an independent review of six of the main providers of risk profiling tools. It has three main objectives:
- Test current risk profiling tools against the FCA’s guidance
- Provide a ‘How to …’ guide to help advisers understand how to use them in a way that is likely to meet the FCA requirements, including those introduced by MiFID II
- Provide additional commentary and good practice examples around assessing the level of risk the client is willing and able to take.
MiFID II introduces a new rule that states ‘firms shall take reasonable steps to ensure that the information collected about their clients is reliable. This shall include … ensuring all tools, such as risk assessment profiling tools … are fit-for-purpose … with any limitations identified and actively mitigated through the suitability assessment process.
This guide can help advisers meet the MiFID II requirement by:
- summarising how the different tools work
- testing them against the FCA’s guidance on risk profiling
- offering a testing framework that advisers can use for other tools not assessed in this guide
- providing a section on using each tool effectively with clients to address limitations
The tools reviewed are:
- Dynamic Planner
- Oxford Risk