Couples’ profiling bias linked to attrition risk

In taking a deep dive into how couples make investing decisions as a household, Capital Partners has found that a quarter of female partners claimed to be inequitably treated in their advice experience.

Of this segment, only 17 per cent were likely to stick with their adviser if they were no longer with their partner.

In its recent report, Capital Partners administered a set of survey questions and its proprietary “revealed preferences” risk profiling independently to both partners of 190 couples.

Here, one in six male partners were also found to be inequitably treated, and they too were at an attrition risk if their female counterpart exited (38 per cent).

As such, the firm said there is “a huge opportunity” for advice firms to re-think risk profiling for couples as a “quick win” starting point in delivering a more equitable advice experience.

Capital Partners noted risk preference gaps between couples are common, with six out of 10 being found to have meaningful gaps.

“When gaps are present, advisers face an AUM (assets under management) risk – couples with risk gaps are half as likely to increase AUM and six times more likely to move assets away in the near term,” the firm explained.

“Advisers’ current methods of risk profiling rarely give them an opportunity to detect the gaps, and don’t lend themselves to equitable engagement of couples.”

The firm estimated that, in line with current methods of risk profiling, advisers have a chance of detecting risk gaps for only 4 per cent of couples.

“Too often, advisers conduct risk profiling jointly – where both partners weigh in on a single
profile. This approach is highly prone to partner and adviser bias.”

Capital Partners further speculated that couples with larger risk gaps have at least one partner who doesn’t feel comfortable with the way their assets are currently invested, which feeds through to intent to move AUM.

Meanwhile, advisers who deliver a strong risk “readout” engender much higher advocacy and a sense of value-for-money in their clients, according to the firm.

Moreover, the Net Promoter Score – a metric gauging customer base allegiance – was discovered to be up to 40 points higher among couples who reported receiving an informed and impartial risk assessment.

“To boot, they’re more likely to deliver equitable advice moments that matter to their clients,” Capital Partners added.

“We see an opportunity for advice firms to achieve relatively quick wins by making changes to risk profiling – which bring together people, process and technology.”

“Proper diagnostics support insightful, equitable and value-added dialogue with couples,” the firm continued.

“Earn trust of both partners by exploring those differences and connecting couples equitably.”