Know What Really

Matters To Clients

Understandable Risk Factors

Risk Preferences

Each individual has their own risk personality or risk comfort level. Our easy to understand questions help determine their risk preference using real world situations that everyone can relate to.

Age

Age is an important influencer on risk preferences, with retirement a major influence. Age is associated with certain life stages, which vary by individual, e.g. when they leave school, start a family or purchase a home.

Family Circumstances

Family circumstances have an important influence on risk capacity. A single person without family obligations is thought to have greater risk capacity, but a married person may have a greater risk capacity if they have a spouse in paid employment.

Employment Security

Employment income is the major wealth accumulator for most people. A person employed in a stable industry, a secure firm and a promising job situation has greater risk capacity than someone in a volatile industry, an uncertain firm or an unstable job situation.

Home Ownership

Risk capacity is affected if an individual is looking to purchase a home and needs to have a precise amount of money on an exact date. Risk capacity is reduced as that date approaches, so that short term market volatility does not disrupt their purchase plans.

Other Risk Factors

Individuals may anticipate other factors, such as health costs or home maintenance expenses, for which they need to provide. Investment risks should be adjusted to account for these expenses.

Improve All Aspects of Client Relationship Management

Client On-boarding

State-of-the-art individualised risk profiling.

Investment Proposals

Appropriate risk levels establish the suitable investment recommendations.

Investment Results

Better client understanding of performance for risk appropriate portfolio.

Ongoing Client Service

Facilitates ongoing discussion of client circumstances and investment needs.

Age & Risk: New Insights

Current Practice

Three risk categories correspond to three simple glide paths. Young investors are often recommended to have the highest levels of risky assets. The equity allocation declines after middle age (40 years old).

Actual Life Cycle

As financial circumstances vary, so does the ability to tolerate financial risks. Income tends to start low at younger ages, borrowing allows them to purchase the things they need, and then save and reduce debt during middle age. Risk capacity is highest when the investor has factors such as secure employment and home ownership.

Source: Federal Reserve Bank of St Louis (2017) Education, Wealth, and Income. (https://research.stlouisfed.org/publications/page1-econ/2017/01/03/education-income-and-wealth)