Gambling as a new tool for financial advisors: Risk Profiling and a new risk assessment tool

Sammanfattning: Financial advisors use paper-based questionnaires to retrieve the information useful to address the clients toward the right financial products and investment mix. In 2004 the European Parliament issued the MiFID (Markets in Financial Instruments Directive) that has the objective to increase competition and investor protection, and levels the playing field for market participants in investment services. Although the cardinal role played by these questionnaires and the regulators’ attention, there are still issues related to the structure, phrasing, interpretation, and contents of them. The aim of this research is to analyse and provide insights about the questionnaires, their importance, and their most debated issues. A relevant part of this research is devoted to model an empirical approach that, through a behavioural and gaming lens, tries to provide a better framework to retrieve those pieces of information needed to better understand the risk tolerance of the clients. The game approach utilized takes inspiration from the poker field due to the ample similarities of this game with the financial industry. On the basis of the results of this research, it can be concluded that, for the first time, the poker experiment was able to predict the individuals’ risk tolerance emphasizing the unexploited power of this gambling field. Moreover, the research has confirmed the correlation between some socio-demographic drivers (age, education and financial experience) and the risk tolerance profile retrieved by the current questionnaires. Finally, it was defined quantitatively the magnitude of the self-judgement bias, one of the most popular and dangerous bias when assessing the clients’ risk profile.