Risk Assessment Explained
This measures the clients understanding of risk and how it applies to their life and financial matters.
This explains how much volatility a client is prepared to accept with their investments based on previous experience and future expectations.
This quantifies the client’s ability to absorb a loss or their rate of change in financial circumstances if a large gain or loss was the occur with the investment.
- Risk assessment is a very important part of any financial planning process. A properly defined and professional process will give the greatest chance of a successful outcome.
At Duffy Financial Advisors we assess a clients attitude to risk using a detailed psychometric risk tolerance test developed by Oxford University. The client completes a risk assessment questionnaire where they will be risk rated. This will dictate the clients asset allocation investment strategy and ensure the level of risk is appropriate relative to their risk appetite and capacity. Risk assessment has the added benefit for a client in raising their confidence in the relationship with the advisor as it shows the advisor understands the need for a comprehensive risk assessment and with the use of a risk profiling tool has taken a scientific approach to this area.
