Generating an instant score that measures the client’s attitude to risk, the tool then calculates a match to one of five risk-based Hansard International Fidelity model portfolios, which were first added to the firm’s range of multi asset funds in June 2015.
Ease of use
“Simplicity was the watchword with this project. Quite often, the tools available from other providers can be overly complicated, asking lots of technical questions that many investors don’t really understand,” Gareth Maguire, head of propositions and marketing at Hansard International told International Adviser.
According to Maguire, the questions have been designed in a way that gets to the heart of identifying the client’s true appetite for risk.
“The questionnaire does not ask technical questions about different types of assets or returns. Instead, these are broad questions that give financial advisers a real appreciation of the client’s inherent appetite for risk.
“Quite often, this kind of questionnaire will be developed by an independent actuarial firm – very rarely these tools are developed by the people that actually manage the assets that sit behind them.”
Maguire does not believe that conflicts of interest can arise with a risk profiling survey designed by a product provider.
“It’s a fair comment, but the goal of the tool is not to force the client down a particular route.”
In fact, Maguire explained, depending on how the client answers the 10 questions, there is a possibility that the investment recommendation will be to avoid all model portfolios.
“That’s how impartial the tool is. The equity exposure from one fund to the next will increase depending on the client’s appetite for risk. But if clients answer the questions saying that they are not prepared to lose any money, then the tool will ultimately propose to them that none of the funds are suitable for their needs.
“That’s the role of the financial adviser as well, to have that appreciation for what would be suitable.”
Simplicity, however, doesn’t mean lack of adherence to international requirements. On the contrary, the survey is compliant with the criteria of suitability and appropriateness established by the Mifid II European directive to ensure client protection in relation to the sale of investment products.
“It certainly ticks that box,” Maguire confirmed. And the tool will also fill the gap for paraplanners active in non-European jurisdictions such as the UAE, where last February the firm launched a partnership agreement with local provider Union Insurance.
“We know based on feedback from our executives based in the Middle East, Hong Kong and south-east Asia that there is a common issue of having financial advisers that are very good at giving general paraplanning advice but aren’t licensed to give investment advice.
“We’re hoping that this will serve their purpose by putting the risk profiling in the hands of the experts at Fidelity, providing them with a simple tool that ultimately links their clients with a fund that matches their risk appetite.”