Texas Tech Crunches Numbers on Risky Business

Australian company FinaMetrica has selected the personal financial planning division of Texas Tech University to analyze data collected by a recent survey. Deena Katz, an associate professor of personal financial planning at Texas Tech, said the goal is to determine significant trends in investor behavior, specifically their tolerance for risk. Examples include:

• How much risk should the client take to meet his or her goals?
• How much risk can the client afford?
• How much risk does the client feel comfortable with?

“I believe FinaMetrica is a world leader in the development of practical tools that enable practitioners to address the single most important factor in guiding clients towards a successful investment program – their risk profile,” said Harold Evensky, adjunct professor at Texas Tech. FinaMetrica gained international recognition for its system that uses the science of psychometrics as a foundation for testing clients and evaluating the results with consistency. The system is web-based, delivering a 25-question survey in language that is easy to understand. Questions include:

• Do you use a financial advisor?
• How has your standard of living changed over the past two years?
• How often do you “lose sleep” worrying about your personal finances?

For the past 12 months, FinaMetrica has participated in the Nightly Business Report/Kiplinger’s Personal Finance “Your Mind & Your Money” series. The participants of this study are Kiplinger’s readers and viewers of the show, who chose to complete FinaMetrica’s voluntary survey. More than 3,600 people responded, and Katz says this summary already shows some interesting results, including how many check their investments daily, and who worries more about financial well being – men or women. “We believe our research will help advisors and their clients understand and manage their behavior during turbulent market times,” Katz said.