News & Opinion

From the Stackup team

Greater Client Servicing with Less Resources

Like many industries financial advice is traversing a realisation that the future is going to look significantly different from the past.  While it can be argued this is always the case, the sheer level of mergers and spin-offs taking place over the next few years is a good indicator that the underlying economics of advice are changing.  Return fundamentals have shifted as regulation increases but the underlying needs of the customer remains the same. One obvious outcome is that advisors will move higher up the value curve and only service clients who will tolerate increased fees.  But others will look for ways they can continue to service clients with less resources and it is here that risk profiling concepts can certainly help.

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Let Technology Take Your Job

Hear that? Well, you probably can't. That's the sound of your smartphone or computer silently running billions of calculations per second so you can carry on with your scrolling.  Compare that to the commotion that would be caused if you had to do 15 calculations in 60 seconds and we can both see why some things are best outsourced.

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The Ultimate Guide to Risk Tolerance Part I

Risk tolerance is a deeply important topic that not nearly enough people have a good understanding of.  If you have investments of any kind, which is almost everyone, then it is one of the biggest determinants of your financial future.  If you are a financial advisor, it is a powerful mechanism to understand your clients, keep them satisfied and remain compliant.

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Building trust with clients

A financial advisor’s relationship with a client is of paramount importance.  When a prospective client meets an advisor for the first time they will be asking themselves three questions:


Can I trust this person?

Will this person understand my unique situation?

Is this person going to give me helpful and unbiased advice?


We want the answer to all three questions to be a valiant “Yes”. But how do we get there?

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Where no questionnaire has gone before

The financial planning world is experiencing a sudden burst of innovation in the risk tolerance assessment space. It was revolutionized by FinaMetrica, which was the first instrument to apply psychometric rigor to the questions being asked—a huge improvement over the ad hoc questionnaires that advisors were making up themselves. (“How much of your money would I have to lose before you would seriously think about firing me?”).

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Risk Profiling The Missing Scale

A ubiquitous problem. You give your clients a fact finding survey - it gleans a baseline of who they are and their tolerance for risk. You need their risk tolerance to make suitable recommendations, to keep them comfortable and stick with their financial plan throughout the cycle. Sure its an ever present legal requirement, but it’s also essential for your long term relationship, as it allows you to match your performance to their expectations. So you’ve consumed via this survey some of the limited mindshare that your client has allocated you, and now you have a number as the output. Or a band, or perhaps a word. 63, band 5 risk tolerance, above average tolerance for risk.

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Why Accurate Risk Profiling is Good Business

Historically, advisors have been able to gloss over the issue of risk tolerance assessment as a box ticking exercise during client onboarding. Regulators have paid sparse attention to the mechanics of assessment and the resultant outputs. In the fallout of the Global Financial Crisis however, suitability of investments was under intense scrutiny amid large increase in consumer complaints. Many clients were unaware of the amount of capital they had at risk, and upon becoming aware, complained that that amount was inappropriate for their circumstances.

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