Developing better tools to gauge a client's risk tolerance

10/17/2013 | Advisor Perspectives

This article discusses the FinaMetrica Risk Profiling System, a tool developed for financial planners to measure clients' risk tolerance that focuses on an individual's psychological comfort with risk. The writer explores how the tool may be an improvement over traditional risk-tolerance questionnaires but still has its flaws. The writer argues that better questionnaires are needed to reflect an investor's actual response in times of market stress, and he recommends a three-pronged approach to creating a model that includes insights about the client-adviser relationship.

View Full Article in:

Advisor Perspectives

Published in Brief: