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Special Report

Risk Profiling - July 2012

Published by Financial Adviser | Jul 25, 2012

Risk profiling has moved up the agenda for many financial advisers as they try to find ways of improving their client offerings.

Many tools have come onto the market to help financial advisers conduct their risk profiling of clients, helping them establish the right kind of investments to proceed with.

Risk profiling has become important not just because of the RDR, however. Many clients are anxious about the markets, after seeing a huge amount of volatility in the past three years, and some have come to realise that they were not as risk averse as they once thought. So advisers are finding that going through their risk profile, and determining which products are suitable has become a useful exercise.

But there are different factors involved in assessing risk. It is not just a case of how much risk they are able to take. It is also a question of whether there are any special circumstances, if there is employment risk, whether there is any legislative risk. And once it has been established how much risk people are able to take, then the client has to be satisfied with the risk profile they are being given. How well the investments are aligned with the correct risk profile is also important.

In recent months, the FSA has taken a close look at risk profiling practices, with concerns about whether the resulting advice is suitable to clients. Regardless, risk profiling is set to become a regular feature in many advisers’ practice.

  1. Profiling a client

    Risk profiling tools can deliver real value by offering compliant and affordable ongoing investment services

  2. Gauging appetites

    Constantly updated risk profiling questionnaires help in determining the proper advice the clients need

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