Neuroprofiler is a game! That’s right – a risk-profiling game. It helps financial advisors assess the investor profiler of their clients who “play” a behavioral finance game compliant with MiFID II (Markets in Financial Instruments Directive) regulations.
(Featured Image: Julien Revelle, CTO of Neuroprofiler / Image Credit: Charles Caratini)
How does it work?
It’s simple. As a financial advisor, or a banker, I just send my client a link to a three-part test taken on a smartphone, tablet or computer. (i) The investor answers a few questions about their financial situation and objectives. (ii) If they have ever wondered what it would be like to go on “Who Wants to be a Millionaire?”, here is their chance to assess their level of financial knowledge with a fun quiz. And (iii) up to 15 questions where the investor must make investment decisions (all hypothetical, of course!).
I then have access to a detailed analysis of my client’s investor personality, placing me in prime position to offer the most suitable advice and better manage their wealth on a daily basis.
How did the founders come up with the idea?
While Tiphaine Saltini was working in private banking, she started to notice significant weaknesses in investor profiling by financial advisors. At the time, she had just begun a PhD in Behavioral Finance. As part of her research, she built a game based on machine learning and behavioral finance to help finance professionals enhance their understanding of their clients’ investor personality. Julien Revelle is the data-geek half of the team! With a background in mathematics and data science, he worked as a quantitative analyst in various financial institutions before joining forces with Tiphaine in 2015. In addition to working on developing the algorithm, Julien is in charge of business development in Luxembourg and London.
And the name?
Our expertise focuses on a unique combination of machine learning and cognitive science. This gives us the tools to profile people based on their behavior. That’s why we chose the generic name “Neuroprofiler”.
Why do financial institutions need Neuroprofiler?
Bespoke investor profiling can only increase client satisfaction. Investor profiling is moreover compulsory under MiFID II for most financial services dedicated to retail clients. So it’s really a no-brainer with brains!
Could you give us an extreme example of rational and irrational investor behavior?
Rationality is actually quite hard to define. Let’s assume, however, that rationality consists of maximizing the expected payoff of a lottery. Let’s take the St. Petersburg Paradox: you toss a coin and if it lands on heads (H), you make €1 and the game is over. If it lands on tails (T), you toss the coin again. Each time it lands on tails, the amount doubles: H -> €1, TH -> €2, TTH -> €4, TTTH -> €8, and so on and so forth. So, given that the gains are potentially unlimited, how much would you pay to play this game?
Answer? Probably not much! Most people answer less than €10 even though the expectation of this gamble is infinite. So actually, if you were rational in textbook terms (and had a pile of cash lying around!) and were asked to pay €10,000 to play this game, you would probably do it!
Are there other industries that could benefit from the tool?
Investor profiling is not just a question of compliance; it is also about client knowledge and segmentation. Neuroprofiler provides a deep insight into client psychology and is a precious marketing tool for any financial institution striving to better understand and serve their clients. This means that, on top of wealth management, the consumer finance and insurance sectors are also key target markets.
When did Neuroprofiler go live?
In June last year. We already have a couple of pilots running within major financial institutions in France and Switzerland, and development is underway in Luxembourg and the UK.
How has Neuroprofiler been received so far?
Really well! We are launching three pilots in just one year; something we are very proud of given banks are quite famous for their lengthy decision processes! Neuroprofiler’s journey has been action-packed so far: incubation at KPMG’s Khube in Luxembourg, winner of the Global Fintech Challenge in Paris, third place at the Fintech Lion Awards and best pitch at Patrimonia. We were also selected for two acceleration programs: Fintech Fusion in Geneva and the Fintech Innovation Lab in London.
This article was first published in the Spring 2017 issue of SILICON magazine. Be the first to read SILICON articles on paper before they’re posted online, plus read exclusive features and interviews that only appear in the print edition, by subscribing online.