Risk profile

Why Risk profiling and not a risk questionnaire? Research shows that investors frequently construct the design of their investment portfolio on past experiences and their own interpretation (or experience) of risk. Previously experienced volatility and past performance too significantly contribute to the nomination of the portfolio design. Research also shows that many financial advisors prefer to agree with a client’s interpretation and nomination of a portfolio design, rather than differing with them on this important subject. The actual client requirements and subsequent portfolio construction are often not empirically tested or processed on an independent basis. Frequently a risk questionnaire is completed with a score or rating applied to each answer. The answers range from a conservative to an aggressive option, with many of the questions being based on the client’s perception of risk, and not on quantitative, researched, or clinical... Read More