Best practices around the use of risk-tolerance scores and risk–profiling methodologies are rare in the finance and economic literature. This issue’s column discusses the appropriate use of financial risk profiles, while introducing the notion that clients likely have more than one risk profile. The possibility that clients have generalized and specific risk profiles helps explain what often appear to be biased or contradictory client behaviors.
John E. Grable, PhD, CFP, holds an Athletic Association endowed professorship at the University of Georgia, where he conducts research and teaches financial planning. He is best known for his work related to financial risk tolerance assessment and psychophysiological economics. He serves as the director of the Financial Planning Performance Laboratory at the University of Georgia.