SA What constitutes financial advice?

[GregorX]

Hi all,

I am a quantitative analyst with an interest in financial markets. Recently some friends have asked me to develop some quantitative risk models to assist them in their personal investing.

I understand this is complex, but does this constitute financial advice? I understand the test is whether an opionion is provided that can be reasonably taken to have influenced one's actions.

I guess the question is, is a mathematical model an opionion? Phrased in that manner, I think most people may say no. However, with most models there are some assumptions made about the nature of the data. Based on those assumptions, where there is some degree of judgement made, the outcome will vary, so the model output is not black and white fact.

If I were able to do this, it would be under a company structure, with a subscription to access the models.

Cheers,
Gregor

 

[Docupedia]

Advice? Possibly not. Financial product? Possibly. Either way, the devil is in the details, and the parameters are wide. A simple recommendation to look at a particular product can be advice. So can be providing information about type of product. It’s dependent on the nature of the information, the context, and what the recipient‘s perspective is.

And if it is either, you will need a financial services license. You will need very specific advice about exactly what the risk model does, and what it outputs. You’re not going to be able to get that here.

 

[kennethbilleau]

The recipient’s perspective is the most important here. Different people evaluate different things differently.

 

[kennethbilleau]

That’s why it’s better to choose the definition and the term you like and just use it.
It will be fair; if anybody has questions, you will just explain your understanding of the subject to them. It’s not that complicated, and I think there should not be any issues with that. You do explain all the time, and I think it would not be much more difficult to explain than what is scalping trading strategy or something of this kind.
So, just proceed to do what you do and use terms you like.

 

[Tim W]

The dumb choice here is doing it for friends.