Join thousands of international professionals and business owners and get weekly insights on health, wealth and happiness.
RP: Hello there. Perhaps the biggest development in the investing industry today is the rise of so-called
Neil Bage is the co-founder of a company called Suitable Strategies and an expert on financial
RP: Because investing is inherently risky, it’s vital to work out your risk profile — in other words, your willingness to take
For Neil, simply completing an online questionnaire is not sufficient.
NB: The first problem we have is, in an online world, that methodology was designed for a face to face discussion, it was designed for you looking at me, the whites of my eyes and asking me questions and assessing my attitudes to risk-taking. That’s how it was designed. It was never designed to be put into an online world. And what people are doing is, they are taking that methodology and are just putting it online and allowing customers to do it themselves. They are removing the whites-of-the-eyes conversation. That’s a really crucial missing piece because the whites-of-the-eyes conversation is more than just asking questions. I can pick up on the twitches in your body, I can pick up on the little movements on your face, so when I ask you a question, I am actually gathering a lot more information than just ten questions.
RP: Another issue is that a person’s risk tolerance is very subjective. An investor isn’t necessarily the best judge of his or her attitude to risk.
NB: We ask people a series of questions and we ask them: “What do you think you would do in this given situation?” And what psychology has proven time and time again is that humans are not very good at putting themselves into a future state and answering a question with any degree of authority. We can’t do it.
RP: The lesson here is that, if you’re in any doubt, you should seek professional financial advice. Even if you subsequently decide to invest online, paying for an accurate risk profile is a sensible move.
NB: People need to be more self-aware and people need think: “Do you know what? I think I know this, but let me just make sure I do, really.” Because these are quite critical questions. This isn’t “Do I want a cup of tea or do I want a cup of coffee?” This is a decision that will affect my life for the rest of my life if it goes wrong. If I lose all my money on a bad investment or a bad financial strategy, that’s a damaging thing to happen. So what I would suggest people
RP: Thank you to Neil Bage, and to you for watching. Goodbye.
Don’t forget to subscribe to our YouTube channel where you'll find acres of digestible investor education - no matter what you're investing for.
By subscribing, you can dip in and out and tailor your own learning programme.
Or get back to our Video Library to find more digestible content.