Assessing a clients’ attitude to risk is a key aspect to giving appropriate advice. To assist with the fact finding process we provide a Risk Profiler tool. By analysing a client’s responses to a series of questions, this standalone tool provides a standardised approach with an auditable, client focused output.
Our investment and actuarial consultants have constructed a Risk Assessment Questionnaire of 12 questions that fall into three main categories.
- Investment details - These questions obtain factual details about the client’s plans for the investment
- Importance and expectations - These questions enquire about the relative importance of the amount being invested and the expected outcome. They are designed to assess the client’s capacity to take on risk
- Tolerance of investment risk - These questions investigate how the client feels about various possible outcomes from their investment portfolio
The responses that the client provides are analysed using our consultant’s algorithm to produce a risk score of 1 to 10.
The risk score is calculated in the following way.
- The possible answer for each question is assigned a score between 0 and 100 that indicates where the client sits in terms of risk.
- Each question also carries an 'importance weighting' reflecting how close a proxy the response is for investment risk.
- The weighting is applied to each score and these are summed to produce a total.
- This total is then mapped against the normal distribution of responses found in the population to produce the final risk score of 1 to 10. 1 reflects the most risk averse investors and 10 are those with the greatest appetite for investment risk.
The output from the Risk Profiler is a report that contains:
- a record of the client’s responses
- the risk score for the client
- an explanation of what the score means
- the ability to include your own bespoke commentary
- a declaration for the client to sign for your records
This is produced as a PDF which can be printed and emailed.
Benefits without additional costs
Adopting a standardised approach helps produce consistency across clients. The ability to easily and quickly generate comprehensive risk assessment documentation, and retain copies agreed by clients, supports both transparency and compliance activities. These are benefits provided by our Risk Profiler.
It is available at no additional cost to Intermediaries that use the Novia Global Wealth Management Service and can be used for all of their clients.