Psychometric Standards for Risk Tolerance Testing
Psychometrics, a blend of psychology and statistics, is the
science of psychological testing. It is an established
discipline which provides standards for test construction and against which tests can
be evaluated for validity and reliability.
Advisers face several key issues when considering how to
best develop an understanding of the risk tolerance of their
What is risk tolerance?
Why is it important that advisers understand
the risk tolerance of clients?
How should advisers go about obtaining an
understanding of their client's risk tolerance?
should advisers look for in a risk tolerance test?
a test of risk tolerance to use in a financial planning
business, many questions need to be asked. How is risk
tolerance defined in the test? How has the test been
trialled? How and when is the test to be used?
The paper "Some Guidelines For Financial Planners In
Measuring And Advising Clients About Risk Tolerance" by
Victor J Callan, Professor of Management, and Malcolm
Johnson, Lecturer in Management, at the University of
Queensland's Graduate School of Management, outlines for
advisers the nature of risk tolerance, and identifies some
key issues in choosing a valid and reliable test instrument.
This paper was published in the August 2002 Journal of
The University of New South Wales' Applied Psychology Unit
confirms that FinaMetrica's risk tolerance test meets or
exceeds the internationally accepted standards for a
psychometric tool of this kind.
View Some Guidelines For Financial Planners
View UNSW Certificate
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The FinaMetrica Risk Profiling System
Goals Based Planning: The Trade-off Between Risk Tolerance and Risk Required
Professional Advisers Obligations in Relation to Risk Profiling
Frequently Asked Questions