Octopus Investments has launched a new online risk profiling tool that aims to take quantitative factors into account alongside psychological or qualitative risk factors, aiming to provide an enhanced risk profiling solution for advisors and their clients.

The tool makes an analysis of an individual’s risk tolerance based on a combination of two sets of data, a capacity-for-risk assessment which aims to capture the client’s investment horizon and common investment objectives.

Octopus have designed the tool to help advisors streamline the portfolio selection process with the view that a greater understanding of risk tolerance has become increasingly central to effective wealth management, said the firm in a statement. The Octopus tool also allows interaction between advisors and their clients regarding their risk tolerance in a bid to increase flexibility in ATR level and suggested investment solution.

The tool has been developed with Barrie & Hibbert and is available exclusively to financial advisors via the Octopus website.

“Having an accurate and reliable risk profiling method has become an absolute requirement for advisors today, and the importance of risk profiling will only increase as RDR approaches. We kept hearing from advisors that they needed a more standardised, clearer and more objective way of servicing their clients and so we decided to design a new kind of tool,” said Guy Myles, managing director and co-founder of Octopus.