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The MRI Comfort with Risk™ model was developed using 25 years of academic research with the goal of helping financial professionals gain a deeper insight into a client's comfort with taking investment risk. The model is dynamic, relying on proprietary algorithms that account for a client's: 

• Willingness to take risk
• Risk preference 
• Risk perception
• Financial knowledge
• Investing experience
• Risk-taking ability
• Financial composure

A version of the assessment that will allow financial professionals to assess a couple's comfort with taking risk is being beta tested. This model will provide the same information as the individual report, but at the household/couple level. 

This site will be updated as soon as the couple model is available.

Every household has unique financial goals, time horizons, and comfort levels with risk. One of the most frequently asked questions is: "When my client is a couple, how do I measure their comfort with taking risk?"

Until today, there has been no systematic way to measure a household's comfort with taking risk. The MRI Household Comfort with Risk™ model, which is currently being beta tested, can be used to solve this problem.

The model utilizes research on household bargaining and behavioral biases to derive estimates of a couple's comfort with taking risk. The household risk score builds upon the base MRI Comfort with Risk™ estimate. The score provides a robust starting point when engaging partnered clients in discussions about risk.

As the household bargaining literature suggests, understanding a couple's comfort with risk can foster better communication between a financial professional and the couple. This can help ensure that both parties are on the same page regarding expectations and investment strategies, leading to a more collaborative and trusting relationship. 

Once a client completes the MRI assessment, a Comfort with Risk™ score is estimated. The client's financial professional receives a report showing:

• The MRI Comfort with Risk™ score
• The MRI Comfort with Risk™ score mapped to one of six portfolio classifications
• Information about the portfolio classification
• A report describing the alignment of the client's comfort with taking risk and their ability to take risk and their past investing behavior

EXAMPLE

Your Client's MRI Comfort with Risk™ Score Is: 65               

MRI Comfort with Risk™ Classification: Your client would be comfortable investing in a   moderate growth portfolio.   

This Type of Portfolio Typically Holds Growth Assets in the Range of:  52% to 65%   

Characteristics of this Type of Portfolio: These portfolios include stable fixed-income assets as well as more growth assets for diversification   and potential gains.    

Feedback on Your Client's MRI Comfort with Risk™ Score: Your client's comfort with taking investment risk aligns with their past risk-taking behavior and their ability to tolerate large investment losses.     

Model Definitions

Comfort with Risk: A composite measure of a client's risk tolerance, risk preference and perceptions, knowledge, and experience.
Ability to Take Investment Risk: Represents a client's capacity to sustain a significant investment loss.
Past Behavior when Taking Investment Risk: Describes how a client has acted in the past when faced with an investment loss. 

Q: How long does it take complete the MRI Comfort with Risk™ inventory questions?

A: The items comprising the MRI Comfort with Risk™ model are embedded in the Inventory. It will take no more than 7 to 10 minutes to complete the entire MRI. Feedback is available as soon as a client completes the Inventory.

Q: What factors did the development team take into account when building the MRI Comfort with Risk™ model?

A: The MRI Comfort with Risk™ model was built with the following factors in mind: 

• The Quickly Evolving Financial Landscape: Financial markets and products are continually evolving as are the needs of financial advisors and their clients. Economic conditions and investor behavior change over time, requiring tools that can adapt to new realities. 
• Client Psychology Insights: Advances in client psychology and behavioral finance continue to reveal more about how investors' emotions and cognitive biases impact their investment decisions. Few existing questionnaires or tests incorporate these insights. Furthermore, there's a growing recognition that each person’s comfort with taking investment risk is deeply personal and influenced by a variety of factors, including preferences, perceptions, ability, composure, and experience. Few of the existing assessment tools in the marketplace capture this complexity.
• Technological Advancements: Improved data collection and analysis techniques can facilitate more complex and nuanced insights into an investor’s comfort with taking investment risk. Rather than rely on a static modeling process, the MRI Comfort with Risk™ model provides a more personalized and dynamic insight into an investor's comfort with taking risk.
• User Experience and Accessibility: The MRI Comfort with Risk™ model aims to enhance the user experience by being more intuitive and easier to complete, which can lead to more accurate responses. The MRI Comfort with Risk™ model was designed to be inclusive, taking into account diverse populations, making the test accessible to a broader audience.
• Holistic Financial Planning: As a component of the larger MRI set of questions, the MRI Comfort with Risk™ offers a more comprehensive assessment by considering a wider range of factors, including someone’s ability to withstand investment losses, past investing experience, previous investing behavior, and investment preferences. 
• Globalization: As financial advising becomes more global, there's a need for risk assessment questionnaires that account for cultural differences in risk perception and investment behavior. The MRI Comfort with Risk™ model was designed specifically for worldwide use. 

Q: How does the scoring system work?

A: The model uses a dynamic scoring process built across the MRI Comfort with Risk™ domains. Each client's score is standardized on a scale ranging from 5 to 95. Someone who is very risk averse will score low on the scale, whereas someone who seeks out risk will score higher. 

Q: What are the six portfolio classifications used in the model?

A: The model maps MRI Comfort with Risk™ scores to one of the following six portfolio classifications:

• Conservative: A portfolio holding 5% to 15% growth assets
• Moderately Conservative: A portfolio holding 19% to 34% growth assets
• Balanced: A portfolio holding 37% to 49% growth assets
• Moderate Growth: A portfolio holding 52% TO 65% growth assets
• Growth: A portfolio holding 67% to 82% growth assets
• Aggressive Growth: A portfolio holding 85% to 95% growth assets

Q: How can I be sure the MRI Comfort with Risk™ model is robust?

A: The MRI Comfort with Risk™ model was built using classical test development theory as a guide. Items and scores were (and continue to be) tested with diverse groups of household financial decision-makers. The base model's reliability estimate is .78, with scores being predictive of the cash, fixed-income, and growth asset holdings of investors. 

Q: I've already assessed my client's willingness to take risk. In fact, the client's portfolio is established. Why would I need a measure of my client's household comfort with risk?

A: Many financial objectives do relate back specifically to one person in a household; however, there are numerous financial planning situations where goal achievement is based on partners in a household working together. Saving for retirement, purchasing a second home, and saving for a grandchild's education costs are examples of household level financial goals. It is possible that without a valid measure of a household's comfort with taking investment risk, recommendations may cause one or both partners concern, stress, and/or discomfort.

Q: What should a financial professional do when tasked with providing guidance on funding a shared goal?

A: Financial professionals deal with this dilemma in numerous ways, including averaging scores from both partners, using the risk score from the more aggressive partner, and basing recommendations on the risk score of the most dominant partner. These approaches are somewhat problematic. The MRI Household Comfort with Risk™ score, which is being beta tested, will provide a more robust indication of the risk level that would be appropriate when dealing with household-level goals.

Q: How often should a client complete the MRI Comfort with Risk™ assessment?

A: Unlike other assessment tools that require frequent reassessment, the MRI approach was built on the robust assumption that an investor's comfort with taking risk is a trait-like factor. This means that the MRI Comfort with Risk™ score should be relatively stable. While scores may vary slightly based on when a client completes the assessment, a financial professional should not observe wide fluctuations in a client's comfort with taking risk over time. If a client does exhibit behavior that conflicts with the initial MRI Comfort with Risk™ score, or they express concern over the performance of their portfolio, they should retake the assessment. At that point, the financial professional should reconcile the two scores.