Professional Advisers' Obligations in Relation to Risk Profiling
Advisers have a professional, legal and
ethical obligation to form a view as to their client’s risk
tolerance and to take that view into account when giving
advice.
In discharging this obligation, the starting point
is an objective assessment of the client's risk tolerance
made by way of a scientific risk profile. A risk profile, of
itself, is not the determining factor in any aspect of a
financial plan. However, if a recommendation involves a
level of risk beyond that which the client would normally be
willing to accept, the client should be
aware of the mismatch and either consent to it or be given
other alternatives. Without this awareness, no client can be
said to have given properly informed commitment to implementation of
their financial plan. |
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Informed consent does not mean that investment risk cannot
exceed risk tolerance. But rather that, if it does, the
client has been made explicitly aware (in language they can
understand - such as the plain-English of the FinaMetrica
Risk Tolerance report) that it does, and of the possible
consequences thereof.
The FinaMetrica Risk Profiling System
Goals Based Planning: The Trade-off Between Risk Tolerance and Risk Required
Psychometric Standards for Risk Tolerance Testing
Our Benefits
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Frequently Asked Questions
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