RT Journal Article SR Electronic T1 The Efficient Frontuzzle: What Investment Risk Profiling Still Fails to Solve JF The Journal of Investing FD Institutional Investor Journals SP 73 OP 90 DO 10.3905/joi.2019.1.098 VO 28 IS 6 A1 Amy Hubble A1 John E. Grable YR 2019 UL https://pm-research.com/content/28/6/73.abstract AB A global study of over 200 professional financial advisors is undertaken to test how risk profile factors are used to make investment portfolio allocation recommendations. When presented with identical risk profile information, similar to what a competent financial advisor would normally collect from a prospective client, respondents are asked to recommend a portfolio allocation among equity, fixed income, and cash for five hypothetical client scenarios. The results find that financial advisors, using their professional judgment, inconsistently puzzled together the presented risk profile factors into portfolio recommendations, on average doing little more than applying the heuristic 100-minus-age rule to recommendations. These troubling results highlight the regulatory need for uniform risk profile evaluation guidance in fiduciary contexts.TOPICS: Portfolio construction, risk management, legal/regulatory/public policy