When clients engage our financial advisory services, we ensure our advice considers their specific circumstances. When deciding whether a product is suitable for our client, we consider best practice principles and clearly defined matrices.
Decisions surrounding liquidity, holding periods, asset allocation and choice of options are entirely dependent on the individual requirements of each client. As a financial advisor, we are obligated to be well-informed, knowledgeable, and qualified before accessing these requirements. Central to this whole process is our client’s risk profile, where we ensure that this is in line with their attitude to risk.
Before offering any advice to a client, first we gain a greater understanding of their financial personality. We discuss their economic history and where they stand now. This considers their ability and willingness to take financial risks in the past, present and into the future.
The process is now more science-based than ever before; it is no longer the case of someone being adventurous, balanced, or cautious. The accuracy of a risk profile is central to ensuring the investments you choose for your clients are suitable. As well as the financial plan put in place is closely aligned with our clients’ objectives and needs, as well as their financial personality.
This can be approached using a simple two-pronged strategy, assessing how clients feel about money and provide them with more accurate advice based solely on this assessment. This will also provide our clients with a level of clarity about their risk profile and how prepared they are to risk their capital. This will also clarify any rewards that they may expect in return for taking or not taking risks.
A client’s risk profile is determined by assessing the following:
- Emotional tolerance of risk
- Financial capacity for risk
- Risk perception
- How to determine the allocation of their assets
- Expected return on investment.
Using the risk assessment tools available and the information derived from earlier discussions with the client, we can now accurately create a plan that takes into consideration the client’s appetite for risk, their financial views, and insecurities.
An accurately constructed plan will help determine:
- Ideal asset allocation
- Recommendations for risk
- A budget and cash flow plan
- A suitable tax strategy
- Proper estate planning
- Assumed returns on investment
We advise and monitor our client’s investments on an ongoing basis, on every aspect of their plan. It is common for a client’s risk profile to alter due to unforeseen circumstances. To mitigate against this, we schedule an annual review, to ensure that the financial plan we have designed for them remains suitable to their current requirements.
When our clients participate in a process of ongoing risk assessment, they will develop a far greater level of confidence in your ability to manage their wealth. When they are better informed, they will begin to feel more secure as they are playing a more active part in their investment strategy. The more comprehensive your risk assessment strategy, the more confidence you will have in your financial plan.
If you are ready to discuss your financial situation with us, please get in contact on (07) 4779 0555.