Explaining the optimal asset allocation to clients The asset allocation of a portfolio is an important aspect as it determines its structure and the varied types of assets that are included in its composition. Before including an asset in his portfolio an investor has to think...
Risk profiling is the process of understanding how much risk is necessary for a client to achieve their financial goals. But this only begs the question – What is risk? The challenge for financial advisors is that the definition of risk keeps changing as research expands. In order...
Understanding financial risk can be a complex subject mostly because everyone seems to have a different definition. Traditionally risk has been defined by a dry and mathematical term called volatility. Volatility being a measure of the dispersion of returns for an investment. Essentially, the amount...
What makes a great risk profile questionnaire? With so many opinions and vested interests its challenging to know what to ask your clients. The FSA certainly has their opinion, so do researchers and clients. We have our opinion and it’s not just a laundry list...
Before the 2008/2009 financial crisis you probably didn’t worry too much about your client’s liquidity risk. Getting their money out would be as simple as putting it in. That was until Northern Rock happened. Given what unfolded and the recent troubles in Cyprus, liquidity is...
When it comes to risk it’s assumed that men generally like taking more risk than women. Some call it biology others believe it’s simple male bravado. Regardless of the reason these assumptions should be challenged and conclusions drawn based on fact. Once we have these conclusions...
How much should age be a factor in assessing your client’s risk profile? I think close to nil. It’s a common assumption within financial planning that younger people have a higher propensity for risk. The problem with this assumption is that every client has a...
