In a nutshell, investors tend to be "aggressive investors" in a bull market and "conservative investors" when the market has crashed. This mobility of a clients "risk profile" makes a nonsense of the concept that it is appropriate or professional to use a risk profiling questionnaire to determine a clients asset allocation.
However, many investment product sales businesses use this approach to "risk profiling" because it creates the perception of complying with Corporations Law as regards to providing appropriate advice which is "reasonable in the circumstances." In fact, it can lead to negligent outcomes and serious mis-selling.
Consumers are not well-served by risk profiling tools. They are in fact very dangerous to consumers investment health.
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