Psychometric questionnaires are designed to assess a certain aspect of psychology and express it on a stable, measurable, scale, such that one person can be compared with others.
Willingness to take investment risk is a relatively table psychological trait, and therefore well-suited to being measured by a psychometric questionnaire.
Psychometric approaches are much more reliable for assessing long-term Risk Tolerance than the subjective assessment of either the client or their adviser.
Numerous studies have shown that individuals have only a very small knowledge of others against which to compare themselves, and advisers are heavily prone to skewing their assessments of their clients towards the adviser’s own attitudes to investment risk.
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