French banking customers prefer a ‘playful’ method to building their risk profile compared to traditional questionnaires, according to a field study by everyoneINVESTED.
The WealthTech startup completed field research of 5,100 French banking clients over an eight-day period. It tasked them with completing their risk profile using two methods, a traditional questionnaire and an alternative, playful method based on decision science.
One of the standout results was that the majority of participants preferred the playful approach over a traditional questionnaire, especially inexperienced clients. A second finding was that the alternative method addresses investor preferences that augmented the output from a traditional questionnaire.
Finally, it found that participants rated the augmented method with a higher degree due to its usefulness and applicability to their own circumstances.
These findings echo research everyoneINVESTED completed in Belgium, Ireland, and The Netherlands.
everyoneINVESTED added that traditional approaches towards risk profiling are a major hurdle in a digital investment journey. It said, “Advisor assistance is critical to complete the questionnaire, and often it is left to the advisor to make a generic risk profile actionable.”
Doing more with technology
The WealthTech company outlined that technology can be a major driver in how financial institutions link more clients to suitable investment products. However, the technology must adhere to regulatory requirements and present the suitability process in an engaging manner.
With this in mind, everyoneINVESTED invited participants to try an alternative for traditional risk profiling with improvements both on content and method.
Its augmented approach mapped the participant’s emotional ability to bear losses when pursuing gains. This information can enhance traditional risk profiles and was previously only achievable by human-to-human conversations.
Being able to better assess a customer’s feelings is becoming popular among regulators. The European Securities and Markets Authority recently favoured the inclusion of behavioural science approaches to support the risk profiling process.
Going back to everyoneINVESTED’s risk profiling method, it presented participants with a personalised sequence of choices. Unlike a static questionnaire, the interactive process makes participants think and links the output unambiguously to the choices they make along the way.
The 5,100 participants in the study were all able to complete the risk profile without any assistance, with 66% of participants having never been profiled before.
It said, “The results show a clear majority of the French favouring an interactive assessment to the traditional, static questionnaire, regardless of their age, education level, financial institution and whether they hold investments or not. 58% percent of the French who haven’t been profiled before by their bank preferred the interactive method. Participants also give the playful approach a higher score on preference, credibility, and usefulness.”
Some other notable findings of the report are that 75% of them don’t want to miss out on a certain gain, but 56% will take their chances to avoid a certain loss. Additionally, they feel the pain from losses 1.5 times more than the pleasure from gains, and despite a range of options 50% opt for default settings.
Read the full report here.
Earlier in the year, everyoneINVESTED concept manager Laurent Lamblin spoke to FinTech Global to discuss how the ESG MiFID II update could impact investing.
Lamblin said, “Regulators have already made clear that this new regulation has no impact on the client’s risk preferences, but it undeniably causes complex questionnaires to become even more complicated.”
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