Behavioural risk is the gap between what an investor says they will do and what they actually do when markets move. It is the third risk dimension, distinct from tolerance and capacity, and the one that determines realised outcomes.
A questionnaire captures an intention. A market decline captures conduct. The relationship between the two is weaker than the industry's tooling assumes.
Nobody rehearses a drawdown. The first real one is the measurement, and by then it has already cost something.
A strategy that is abandoned partway through has not delivered whatever it was designed to deliver. The realised outcome belongs to the investor's actual holding period, not to the strategy's.
Past conduct is the most useful available evidence — what someone did in previous declines, whether they have changed strategy after volatility before, how they responded to a large unexpected expense. History is imperfect but it is revealed rather than stated.
It is not a prediction. Nothing about behavioural analysis forecasts what a specific person will do on a specific day, and any tool that claims otherwise is overreaching.
It is an input to a conversation and a suitability file. The judgement stays with the adviser.
Tolerance is what they say. Capacity is what the arithmetic allows. Behaviour is what happens. Only the third one is the outcome.
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