Countering Client Anxiety With Risk Scores Rooted in Reality

Market volatility is par for the course in investing—yet it can still catch your clients off guard. When markets dip or volatility prevails, investors often let their emotions rule, sparking feelings of anxiety (and even panic). This can lead to a premature sell-off, which can drastically reduce their returns in the long run.  Case in […]

The Dangers of Gamified and Thrill-Seeking Investing for Gen Z and Millennials

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Investing has always come with some risk, and it’s understood in the financial community that the more risk a person takes on, the more they may expose themselves to both big gains, but also big losses. Today, with national news headlines of the occasional meme stock trader, NFT connoisseur, or cryptocurrency investor making six figures […]

The Importance of Understanding Your Risk Profile for Your Retirement Accounts

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With pensions nearing extinction, most Americans have had few other options but to build their own retirement nest eggs. Many individuals have turned to their 401(k) or IRA, to build up funds, hoping it will be enough down the line when they finally stop earning an income. If you have a good portion of your […]

Why Risk Preference and Risk Capacity Need to Be Scored Separately

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Risk tolerance questionnaires have traditionally consisted of questions that produce one score centered around risk preference or attitude, which advisors then use to create portfolios or record the rationale for how they match clients to specific firm models. This can often create misalignment as it may not expose the entire reality of an individual’s overall […]

Why Fact-Based Multidimensional Risk Capacity Is a Superior Approach for Financial Advisors to Profile Their Clients

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Advisors have traditionally used risk tolerance questionnaires and basic timelines as the basis for portfolio recommendations. Unfortunately, these practices are riddled with flaws. As outlined below, including and prioritizing risk capacity offers a far superior method in advising clients with their investments. The Pitfalls of Risk Tolerance Questionnaires Risk tolerance, or preference, is based on […]

Why Traditional Risk Tolerance Questionnaires Lead to Inaccurate Risk Appetite

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As an advisor, you have probably been relying on financial risk tolerance questionnaires to assess a client’s risk preference. Then, depending on the client’s answers, you gear the portfolio to a more or less aggressive approach.  The problem with this method is that the questions weigh heavily on how a client generally feels about investing […]