Once you have identified the most suitable product for your client, you should assess the client’s attitude to investment risk. Read our sales aid for more information on what investment risk is and why it matters.
Our Risk Profiler tool helps you determine the level of investment risk appropriate for your client's investment goals and timescales through 11 simple questions. It is designed to translate your client’s answers on investment risk into a single number – a ‘client risk score’, ranging from 1 to 5.
A client’s risk score is not meant to be treated as a definitive and final risk rating. Its purpose is to provide a starting point for a more in-depth discussion with the client about their attitude to risk and their willingness and capacity to accept possible loss.
The client’s attitude to risk may vary depending on their financial goals and the timescale of the investment concerned. A liability-driven objective, such as school fees, may require more certainty about potential returns.
You can simply use our online tool with your client or email the questions to your client in advance of your meeting by using our risk assessment questionnaire. Please read the next section about tips on discussing risk with your client.
Once you have determined your client’s initial risk rating, it’s important to explain what the rating means and discuss its implications. This will help you to ensure they invest at a level of risk they are both willing and able to take. Read our Assessing your client's risk profile sales aid.
It is important that you don’t focus on just the investment risk a client is willing to take. You should also take into account the client’s other possible investment needs and objectives, such as repaying debt or potential need to access capital.
When a risk rating has been established and agreed with your client, an investment portfolio can be built with an asset allocation which is optimised to provide the maximum expected return for that particular level of risk.