Popular financial tool at Mizzou will help investors, financial advisors assess risk

MU will be the exclusive source for popular Investment Risk Tolerance Assessment

January 30th, 2018

COLUMBIA, Mo. — When financial advisors meet with potential clients, they are required by law to ask about the client’s risk tolerance which is typically measured by simply asking ‘what’s your risk tolerance?’ This can lead to inaccurate answers and put investor’s money at risk. Now, the University of Missouri has taken ownership of the Investment Risk Tolerance Assessment, a 13-question free survey that assesses personal investment risk tolerance. This will not only help investors and financial advisors assess risk more accurately, it also will give researchers an important tool to study the investing process.

“Life events, stress and mood can impact how a person may assess his or her risk tolerance,” said Abed Rabbani, assistant professor of personal financial planning at the University of Missouri. “Having an objective survey that can provide better assessment of risk tolerance will lead to better investment advice for consumers.”

The tool, previously housed at Rutgers University, is used by financial advisors to measure and understand their clients’ risk attitudes before assigning assets. For individuals, the risk scale often is used to understand their own willingness to take financial risk and analyze investment preferences.

Developed and tested by John Grable at the University of Georgia and Ruth Lytton at Virginia Tech, the Investment Risk Tolerance Quiz was first published in a 1999 journal article for Financial Services Review. It was among the first publicly available measures of financial risk tolerance. Since its creation, more than 200,000 people around the world have taken the survey.

“Rutgers University provided a valuable service to consumers and researchers by hosting the risk quiz,” Grable said. “I am so pleased to know that the quiz will be available free to the public through the University of Missouri.”

The Investment Risk Tolerance Assessment is believed to be the largest personal finance research database ever created. The University of Missouri’s Department of Personal Financial Planning in the College of Human Environmental Sciences now hosts the free survey on its website.

The new site will be overseen by Rabbani. He obtained his doctorate at the University of Georgia, where he studied under Grable.

“It is a privilege to oversee this large data collection effort—I have added affinity to it as my doctoral dissertation was based on data from this quiz,” Rabbani said. “I thank Barbara O’Neill and Rutgers University for overseeing this valuable resource for so many years. We will give our best to ensure quality while it is hosted at the University of Missouri.”

The quiz has been featured in both financial planning textbooks and popular nonfiction books. On Google, it is the first result listed for the search “investment risk tolerance.”