Selecting the right fund according to risk appetite

This article is part of
Guide to Multi-Asset Investing

"This means that our clients’ risk profile is determined, this matches with the asset allocation of their portfolio and the underlying funds used to populate this have been thoroughly researched and approved by our investment experts.”

He added that the risk profile is reviewed at each annual review meeting thereafter and adjusted where necessary.

He said if a client has a small pot of assets and typically only wants one-off advice, the approach at Chase de Vere would be to place the client into multi-asset funds.

 He said that at Chase de Vere, the management of a client’s portfolio is divided between the financial planning, where the level of risk a client should take is ascertained.

The investment management team then select the investments in line with that risk profile. 

 Ms Bliebenicht said: “IA categories based purely on equity weights provide a simple heuristic and may be suitable in some situations.

"However, we believe that a large proportion of investors are better served with solutions which aim to deliver an investment outcome in line with the client’s long-term risk profile.

"IA sector equity bands are typically quite wide (for example 40 per cent - 85 per cent) which means that a fund could operate with significantly different levels of risk at different times."

David Scott, an adviser at Andrews Gwynne in Leeds said: “We think one of the things that some advice firms do that we don't find suitable is when they do the risk profiling, they decide the level of risk selected is where the client should almost always be, but we take the risk weighting as the maximum.

"And for where we are now in the market, even our higher risk profiled clients are in lower risk portfolios now.

"We don’t tend to pay any attention to the IA classifications.

"With the lower risk clients, we would take less of a geographical or sector specific view, and place the clients into a more global portfolio, such as Scottish Mortgage investment trust.

"We don’t tend to use multi-asset funds, but would look to achieve diversification through things such as hedge funds and other multi-asset funds.”