Forget profiling, there is just one client risk category

“That means you are a ‘Sensible’ investor, who is happy to accept the risk of a 20 per cent fall in your investments in return for the opportunity of higher growth over the medium to long term.

“That means we recommend our Growth portfolio containing 70 per cent equities...”

Have you ever seen or heard of such complete tosh in all your born days? Actually, perhaps you have.

Where do we start? First of all, where have we even begun to deal with clients’ capacity for loss? What about the actual return required? What about the basic fact that the client is a living, breathing human being and not, to coin a phrase, a number?

The process described above to ascertain a client’s attitude to risk is all too common. I liken it to holding the client’s hand closer and closer to a fire, and the point at which they say “ouch” is deemed to be their attitude to risk. How stupid.

Can we be clear here please? There is usually only one classification of risk for clients: the cautiously greedy. They want 10 per cent plus returns, but are only comfortable with cash-like risk.

Our job as planners is to reconcile these tensions, and steer a path through to the art of the possible, using sensible assumptions, and using robust tools as a guide.

But, please, not to say “you’re a 6, that means 20 per cent in hedge funds”.

Phil Billingham is chartered financial planner at Perceptive Planning