What Questions Should You Include In The Investor Risk Tolerance Questionnaire?

The unwillingness of clients to show all their cards is one of the major barriers faced by financial advisors. Most clients do not explain all their personal, economic, and family situations in detail. So, the investor risk tolerance questionnaire plays an essential role for financial advisors. Professional financial advisors are also responsible for emphasising the importance of sharing data in quality financial advice. This strategy enables advisors not to walk blindly and err in the diagnosis or the solution.

What Questions Financial Advisors Must Ask To Make A Risk Profile

Financial advisors need the information to do their job well. Having the required information helps advisors develop a good plan for their clients. What details advisors must ask for are as follows:

1. Personal Information

Personal or family data are of vital importance. If a client has children, the advisor should include a protection plan to guarantee their quality of life in case of unexpected events. If the client is 30, the plan will be very different from that of a 65-year-old person, who will most likely be in another phase of life.

2. Employment Data

The relevance of labour data is much more. In the case of self-employment, a person will need to pay more attention to how a retirement plan is made. If a client works in a company in a senior position with handsome pay, the financial advisor could conclude that their economic situation is somewhat more stable and comfortable than others. In case of unemployment or low pay job, a person could receive compensation that would give some peace of mind.

3. Economic Data

One of the most integral parts of the investment risk questionnaire are the economic-related questions. Economic data identifies the client’s purchasing power. And that purchasing power, whatever it may be, must be kept in mind when developing a financial plan.

If a person with a very high income wants to maintain their quality of life after retirement, such a person will have to struggle a lot. The reason is that covering that income will become more complex. Despite having more economic troubles in their life, a person with little income will probably have an easier time maintaining their living standard after retirement.

All these issues are of distinctive relevance when designing a savings plan and a long-term family protection plan.

4. Debts And Savings

Debts and savings related questionnaires will let advisors determine what amount the client carries on their backs. They can also determine how they could affect the client in a situation of unemployment or any other unforeseen event.

Confronting debt with savings gives the advisor and the client an idea of the net worth. In other words, if the client pays off all debts with all savings, what balance do they have left? And the question is, do they stay calm with this figure? What if the client was left without employment or income?

It is essential to know the destination of the accumulated savings. Every financial plan should have priority objectives, such as retirement and children’s education. And if it is not contemplated, it will have to be included in the plan to assess its viability.

Wrap Up 

Financial advisors must know the investor profile before making any financial plan or investment plan. This helps them determine the client’s risk tolerance and, consequently, the type of product or investment to contract. And, in turn, the result of the plan. If you are an expert financial advisor but currently facing a problem with Risk assessment tool, no problem at all! Pocket Risk is a professional online Financial Risk Survey for financial advisors. Our experts are always ready to help you assess how much investment risk your clients are willing to take. Contact us and start assessing the tolerance of your clients’ today!