Established in 1825, Standard Life is a leading provider of long-term savings and investments to around 6 million customers worldwide. Headquartered in Edinburgh, Standard Life has around 9,000 employees internationally.
In 2005 Standard Life commissioned Oxford Risk to provide an online, questionnaire-based, risk-tolerance profiling tool for its IFA customers as part of an online financial planning process within their Wrap project. IFAs use the tool at an early stage of the financial planning process; the customers do not use the tool themselves. The tool provides one input to a portfolio selection process where an appropriate asset mix for that investor is picked from a range of ‘pre-packed’ risk/return-optimised asset allocations. The presentation of these options is moderated by the IFA.
In 2010 Standard Life introduced a ‘self-service’ customer platform to complement its other sales channels, firstly for selected Pensions and Retirement products, then followed by a general Goal Planning offering in late 2010. Standard Life wanted a risk tolerance assessment that would be informative as well as simple to use for its new online users.
Oxford Risk delivered an ‘off-the shelf’ 10-question Risk Tolerance assessment together with a scoring methodology calibrated to Standard Life’s target customers. We also advised on its online use and how, in the context of investment options they might be considering, the information should be presented to customers. It was recognised that the online environment was not a moderated process; there was no IFA to be satisfied that the client has given a fair and realistic assessment of their needs, considerations, concerns and abilities, or to probe, ask more questions and present more options. Consequently Standard Life makes it clear to the customer that:
The tool is a guide for illustrative purposes only, and doesn’t look at other factors, such as stage of life, financial goals or the size of financial loss they are able to withstand;
Risk is just one of the things to consider when making investment decisions. For example, the term of investment and whether the customer might want to access your investments before the end of this term are also important;
The customer should always get professional advice before taking action.
Standard Life have found the Risk Tolerance assessment gives them a competitive edge to their online platform. Customer feedback has been very positive with users confirming it meets its design objectives, saying they find the tool useful, informative and easy to use. As importantly, Customers understand the limitations of ‘self-service’ and often go on to seek advice from Standard Life’s IFA partners.