Question 1: Uncover the risk attitudes your clients already have.

Question: Shall I show you what many other people have done, or would you prefer something innovative or different that I can show you? If clients answer with wanting to know what others have done, then they prefer safety in numbers. These people are going to be risk-averse; they want to know what others have done so they know it’s less risky. If a client answers with no, I'd rather you tell me something innovative or show me something different, they're going to be risk tolerant. Their conversations are going to be really engaging if you talk about where this might lead them or what new opportunity this might be created because of this financial decision.

Question 2: Discover the level of control your clients like to have.

Question: Do you want me to go through all the details? Or would you prefer a summary now? People who want the details upfront generally want to be in control because they want to know everything that they can talk about. They can look through the details to make sure there's nothing risky, as they’re more likely to be risk averse. People who want a summary are a bit more risk-tolerant and not so bothered about feeling that they are in control of that process. They want to be in control of the end result. Advisers should focus on what it could lead to rather than how it gets them there, this will make them excited and engaged.

Question 3: Understand if the client is thinking about themselves or others to tailor conversations to their needs.

Question: Can you tell me what you'd like to achieve by having more money available to you? If they start talking about the family, you know that they are quite socially minded and it's for the good of the group. Use this to <a href="/understanding-the-family-influence/" title="Understanding the family influence" data-anchor="#">focus the conversation on their family.</a> If they use the words ‘me’ and ‘I’ then this would indicate their thinking about what it looks like for them as an individual before they think about the family. Advisers with clients who answer in this way should start the conversation with how the suggestions will benefit the client.

Uncovering your clients’ risk appetite

What does psychology tell us about risk tolerance?

How we feel about risk can impact how we think of our future. That’s why we asked Dr Simon Moore, a Behavioural Psychologist from We are IB*, to explain how advisers can frame conversations around risk for better client outcomes. Here’s what he had to say.

Dr Simon Moore, Behavioural Psychologist, Innovationbubble

We know from a psychological point of view that there are four risk groupings of people in the world, regardless of their gender, age, ethnicity, nationality or geographical location.

We all have elements of these four groupings within us however, one of these will be stronger than the other three. And because of that, that's what influences how we think, view the world and how we need to be spoken to.

I’ll explain these four groups and the ways advisers could use these insights in their conversations:

The four risk groupings of people in the world

A risk-averse organiser

These people are organisers and like to know what's about to happen next. They are risk-averse and prefer predictability to surprises. They’ll want advisers to provide them with all the details, so don't start on the opportunity with them because they won’t have the headspace, they view the world as risky.

A risk-averse member

Again, these are quite risk-averse people but in a slightly different way. They're not so bothered about the details. They’re all about social connectivity and membership. They will be reassured by advisers highlighting that lots of other people go with a certain product or policy. It's all about numbers and safety for these people.

A risk-tolerant leader

These people are risk-tolerant and it’s all about how something is going to improve their status, ego, or make them feel intelligent. Focus these types of clients’ conversations on how the product or service will improve their status, social standing or ego.

A risk-tolerant explorer

Again, these people are risk-tolerant, but they want to know all about how something is going to take them to the next level of improvement. For them, it’s all about exploration, innovation and adventure. They’re all about what new doors might open if they engage with this and what new things might be available to them.

Three questions to identify client risk and construct conversations

There are three questions that will be useful for advisers to use, to identify the best way to construct their conversations to aid engagement from their clients:

Question: Shall I show you what many other people have done, or would you prefer something innovative or different that I can show you?

If clients answer with wanting to know what others have done, then they prefer safety in numbers. These people are going to be risk-averse; they want to know what others have done so they know it’s less risky.

If a client answers with no, I'd rather you tell me something innovative or show me something different, they're going to be risk tolerant. Their conversations are going to be really engaging if you talk about where this might lead them or what new opportunity this might be created because of this financial decision.
Question: Do you want me to go through all the details? Or would you prefer a summary now?

People who want the details upfront generally want to be in control because they want to know everything that they can talk about. They can look through the details to make sure there's nothing risky, as they’re more likely to be risk averse.

People who want a summary are a bit more risk-tolerant and not so bothered about feeling that they are in control of that process. They want to be in control of the end result. Advisers should focus on what it could lead to rather than how it gets them there, this will make them excited and engaged.
Question: Can you tell me what you'd like to achieve by having more money available to you?

If they start talking about the family, you know that they are quite socially minded and it's for the good of the group. Use this to focus the conversation on their family.

If they use the words ‘me’ and ‘I’ then this would indicate their thinking about what it looks like for them as an individual before they think about the family. Advisers with clients who answer in this way should start the conversation with how the suggestions will benefit the client.

As Dr Simon Moore explains, there are multiple things to consider when assessing how your clients view the world. These psychological insights could help you to identify your clients’ risk appetite and uncover their true needs.

*We’ve partnered with We are IB, leading experts in behavioural psychology, to understand how clients think and the barriers this might cause when it comes to thinking about the future.