An important part of the IFAs fact find is discerning their Client’s Attitude to Risk. Understanding how comfortable a client is with the risks of investments is a valuable tool for securing the best investment for their funds. Finding the motivations and drivers and how various potential outcomes would affect a client are vital to understanding the ATR and what to recommend for each individual. Most clients sit well within a core grouping of one of the ATR definitions - but occasionally there are those whose needs objectives and boundaries differ. Investing your money is more than just a gamble or simply 'surviving' the market.
Some clients are the Ed Stafford’s of investors – they are prepared to take substantial risk for the prospect of the highest possible return. Such clients understand the potential rises and falls and are prepared for such losses and gains. These are categorised as Adventurous investors.
The next level of risk takers are the Les Stroud types – they are prepared to accept a reasonably high element of risk to their investment in return for longer term performance. This group of client are confident in their investment knowledge and do understand the potential for their investment to go down as well as up. These are categorised as Moderate to Adventurous.
Moving on we find the Bear Grylls of investors – accepting of an increase of risk in return for optimised return. Bear’s are informed of all the scenarios and risks and like to have a balanced approach to investments. These are Moderate investors.
Next up on the list of investing Survivors is the Ray Mears – they are well prepared to make investment and less prone to take unnecessary risk with their capital. These are Cautious-Moderate investors.
Backing up the Survivors is the Tom Good – yes this investor wants The Good Life! Prepared to invest but with little cost to their capital. These are Cautious Investors
Going through a review each year enables the IFA to ensure his client’s ATR are accurately recorded and the investments actively reflect the risks the client are prepared to take. This is part of the Suitability Report which is an important part of instilling client confidence. Whilst the degrees of characteristics in each clients attitude is simplified here, things do change and ensuring the client remains comfortable with where their funds are invested is paramount.
For your own walk on the investing wild side talk to Langhams Associates Ltd and let us discover your inner Investing Survivor! Call us on 01473 487611 or email email@example.com