Chapter 4: Risk Profiling

Assessing client's preferences and restrictions in a risk profiler is essential for providing customized investment advice. There are many ways to structure and use a risk profiler. This chapter discusses the advantages of using a risk profiler, compares different alternatives and demonstrates how to use behavioural finance to improve them.

The chapter is structured as follows.

4.1. Dealing with behavioural biases
4.2. The risk profiler and its benefits
4.3. Designing a risk profiler: Some general benefits
4.4. Implemented risk profilers: Case study of the former Bank Leu
4.5. A risk profiler based on the mean-variance analysis
4.6. Integrating behavioural finance in the risk profiler
4.7. Case study: Comparing risk profiles