This is because what clients say is not always necessarily reflected in their behaviour and completing a questionnaire might change depending on their mood and circumstances.
She explains: “Data from questionnaires and our behaviour can be misleading as it looks at a very narrow context over a limited timeframe.
“That could allow assumptions about correlations to influence the segmentation that may not be appropriate.”
However, she says that as data analytics and machine learning become more advanced, it should be easier to understand clients within a wider data context over a longer timeframe.
She says: "This would allow a much finer, subtle level of segmentation, which may or may not be more appropriate.”
Indeed, it could be argued that segmentation post-Mifid II has already started to bear results, with advisers being encouraged to move away from transactional methods – focusing on age and AUMs – to more bespoke methods of gaining client data based on behaviour and outcomes instead.
Ms Holt continues: “The field of data is evolving quickly and the biggest risk is that we do not know what we do not know.
“It is therefore important to stay vigilant and question the methods applied to segmentation and results to ensure we continue to identify and guard against blind spots.
Mr Davies adds that advisers “have to start with the client first – that is a whole soft skill questioning process which will include technology and discussions around their attitude to risk and capacity for loss”.
He suggests there are some “really robust technologies out there”, citing suitability tools launched by Oxford Risk, SuitabilityPro platform by PlanPlus which hosts FinaMetrica Profiler, and Dynamic Planner.
These provide “good evidence-based practice around how to make sure advisers get a good holistic view of clients risk profile”, he says.
He continues: “So when it comes to segmentation and the tools advisers are using around things like risk profiling, they have to make sure they have done their research and proper due diligence so the tool is fit for purpose and does what it should do.”
Victoria Ticha is a features writer at Financial Adviser and FTAdviser
