Software provider Dynamic Planner is partnering with the University of Reading for a study initiative to map the behavioural science intricacies of risk profiling investors.
Dynamic Planner says the study with Reading’s Henley Business School will work to help advisers better understand investor attitude to risk.
The research is partially funded by the government under the Knowledge Transfer Partnership programme and will track psychological outcomes of investor behaviour when investments fall in value.
This will include the time it takes investors to act, communications at point of sale, and determine if behavioural traits can correspond to potentially detrimental action.
Dynamic Planner proposition director Chris Jones says: “There are lots of negative influences on people and on investors to make bad decisions and we want to bring a positive.
“Mifid II requires an explanation of risk and reward trade off and we as an industry don’t know all the answers to this. The FCA’s requirement for understanding risk is very clear and it’s obvious too that the regulator wants us to do more.”
The two-year initiative will be entirely research focused and involve weekly co-work between the University and Dynamic Planner.
Jones says: “We have a software platform that can do almost anything, we have data, and now with the behavioural science knowledge through this partnership, we will be able to identify why investors make certain decisions in certain ways.
“We will build up findings for attitude to risk profiling knowledge. The first step is to develop the psychometrics, then we will work out interventions that can be put into place.”
Henley Business School professor Kevin Money says psychology is now a key component in profiling risk effectively.
He says: “We’ve helped Dynamic Planner redesign its risk profile questions before and from an academic perspective, this partnership is hugely important to us. It’s not just about profiling people, it’s about educating them so that they know how they truly would respond in the face of risk.
“We are both respected organisations in our field and it was therefore natural that we should both choose to work together on this long-term study.”
The initiative with Henley Business School follows the launch of Dynamic Planner’s Mifid reporting tool in June.
The tool is part of Dynamic Planner’s three-year £5m programme of planned upgrades.