Of all the decisions that go into financial planning, the one that will have the greatest impact on a client’s future is this: how much investment risk should you take?
In order to work this out, you need to consider the three different aspects to risk profiling:
The psychological willingness to bear investment risk. Expressed another way, this is the willingness to accept a higher chance of a ‘poor’ outcome in pursuit of a higher chance of a ‘good’ outcome.
The financial ability to withstand financial loss, or a fall in value of volatile assets. Think of this as the extent to which your client's future lifestyle would be affected if they lost all or part of the amount invested, or if the value of their investments fell temporarily because of market uncertainty.
Goals and aims
The reasons why your clients wish to invest. They may have very specific goals, or they may just have a vague idea that they want to invest for a number of years without being certain what the money will be used for
We take this very seriously. We use the latest tools and techniques to help you calculate how much risk your clients can tolerate, how much they can afford, and how much they need to take to achieve their goals. We’ll also show you how to balance these three factors in order to help set realistic objectives.
You can read more in our Understanding your risk brochure by clicking here.