Scientist warns of false confidence in 'witchcraft' risk profilers

Existing risk profiling tools present inaccurate outcomes, firm claims

Carmen Reichman
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An American company has developed a risk profiling tool it claims more accurately captures clients' risk appetites and should supersede the "witchcraft" products currently used by advisers.

Capital Preferences is launching a risk profiling tool in the UK which it claims delivers more meaningful and precise outcomes, based on mathematical evidence. The company wants its tool to replace those currently being used by advisers, which it said are based on psychology and deliver outcomes with "no statistical accuracy". The new tool is based on a scientific concept developed by Shachar Kariv, a professor of economics at UC Berkeley. It focuses on decision making and game theory techniques as well as mathematical theory, to determine a person's full risk profile and aversion ...

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