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Ex-regulator releases risk profiling guide in run up to MiFID II
12/09/2017 , News Team

A former member of the Financial Conduct Authority (FCA) has released a guide to the “main” risk profiling tools.

Rory Percival, the author of the guide, spent 20 years working in financial advice, “mainly in compliance, training and technical support roles”, before moving to the regulator for ten years. He has since established a training and consultancy firm.

Risk profiling is an important area and, under MiFID II, is set to become more so. According to Mr Percival MiFID II introduces a new rule that states “firms shall take reasonable steps to ensure that the information collected about their clients is reliable. This shall include… ensuring all tools, such as risk assessment profiling tools…are fit-for-purpose…with any limitations identified and actively mitigated through the suitability assessment process.”

The guide covers six of what it calls the “main providers of risk profiling tools,” namely A2Risk, Dynamic Planner, EValue, Finametrica, Morningstar and Oxford Risk. The report summarises each tool and tests them against the FCA’s guidance. It highlights any limitations and how to use them to address these.

If you are not using one of these systems the report also provides a “testing framework” that can be applied to other tools. In addition, it includes “additional commentary and good practice examples around assessing the level of risk the client is willing and able to take.”

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