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Quick Info

Overview

The risk model is a core component of the platform. It classifies clients into risk categories based on their risk tolerance, risk capacity, and investment knowledge to ensure suitable portfolio recommendations that comply with MiFID II suitability requirements.

Purpose: Determine an appropriate risk level for each client and investment goal, enabling accurate matching between client risk profiles and suitable investment portfolios.

Key Benefits:

• Consistency – Equal clients are assessed equally, ensuring fair and transparent treatment
• Compliance – Systematic assessment of client risk profile meets MiFID II requirements for collecting client information and determining suitable investment recommendations
• Flexibility – Fully configurable to align with your firm's investment philosophy and risk assessment methodology
• Transparency – Clear documentation of how each client's risk classification was determined

Core Components

The risk model consists of three main components that work together to produce a final risk score:

1. Initial Risk Assessment

Establishes a baseline risk level by combining:

• Time Horizon – Investment timeframe based on client goals
• Risk Tolerance Questions – Client's willingness to accept investment risk and volatility

2. Risk Adjustments

Refines the initial assessment by considering:

• Loss Aversion – Client's behavioral response to portfolio losses