Does this income questionnaire meet the FCA requirements for quality?

EV offers all the best practice elements that an adviser needs to ensure that investment recommendations can be made suitable to a client's risk profile. These are summarised in the table below;

 

FCA good practice recommendation

EV Income Risk Profiler

Capacity for risk

Additional questions are included after the psychometric questionnaire to assess capacity for risk. These can be configured to meet advisers' requirements.

Clearly worded and easily understandable questions

All questions are trialled with target investors before being used in questionnaires to ensure that they are easily understood and unambiguous.

Information on investment objectives

The individual’s assessed income risk profile can be used in the advice process to help identify a suitable investment for their objectives. 

Clear descriptions of risk

EV communicates the income at risk in multiple ways through clear wording and forecasts of potential outcomes.

Sensitivity to answers to individual questions

Questions are trialled, and answers tested for consistency, with additional questions incorporated to reduce the sensitivity to the answer given to any one question.

Regular management information on the results of risk profiling tool

The EV psychometric risk questionnaire includes demographic information so that management information on the distribution of risk profiles is continuously available online in aggregate and by individual firm or adviser 

Regular updates of client risk profiles

A record of clients risk profiles is maintained and changes recorded over time.

Avoidance of wide risk bands that include clients with very different risk profiles in same risk band

The position of a client's risk profile in the risk band is shown and the probability of the client being in an adjacent risk band given.

Client engagement and understanding

EV offers alongside its psychometric risk questionnaire some quick and simple stochastic forecasting tools which can illustrate potential outcomes from investment solutions matching different risk profiles, and the effect this has on the level and sustainability of income over time. The whole risk assessment process is captured in a client report.   

Investment recommendation consistent with client's risk profile

Stochastic modelling allows investment recommendations to be matched precisely to risk profiles with a clear definition of the boundaries for each risk profile.

Guidance on the use of risk profiling tools

Extensive information on the methodology used to construct a psychometric risk questionnaire is available together with a guidance note on how it should be used.