"A quick and straightforward risk questionnaire designed by leading experts to help you assess your client's risk tolerance category. It incorporates a customised client report, paper trail and links in to sophisticated portfolio planning tools."
Why assess your client's risk tolerance?
To select the most appropriate investment strategy for your client, it's vital to understand their investment goals and risk tolerance.
Your client's risk tolerance is a measure of both their emotional and rational responses to changes in the value of their investments, i.e., their ability to withstand losses. It is usually linked to their temperament, time frame and financial circumstances.
Why use a risk questionnaire?
Risk questionnaires are a recognised way of assessing risk tolerance. To help you assess a client's risk tolerance, Standard Life has developed a risk questionnaire in conjunction with Oxford Risk Research and Analysis (ORRA). They use a set of questions to assess someone's risk tolerance.
Who are ORRA?
ORRA are an independent company, linked to the University of Oxford. They are leading experts in the field of risk analysis, dedicated to the practical application of knowledge in risk and risk behaviour. They have vast experience of creating risk and decision-making solutions in a diverse range of commercial industries including insurance and the government. ORRA have used the latest techniques from mathematical modelling and the expertise of world-class scientists to produce a robust, effective and unique risk questionnaire, specifically created for Standard Life to help you understand your client's risk tolerance.
Why the ORRA risk questionnaire?
In designing the questionnaire, ORRA carried out extensive, rigorous research to devise 17 questions, which allow you to categorise your client into the correct risk tolerance category. The specific number and type of individually designed questions ensures that the questionnaire is effective in evaluating the client's risk tolerance, yet is still very easy to follow and quick to complete. It is filled out on-line, providing a straight through, immediate conclusion. A risk tolerance profile and report specific to your client is then automatically produced.
The questionnaire measures the client's overall risk tolerance and places them in one of the following five risk categories:
The higher the risk category, the more willing the client is to take higher levels of risk when making financial decisions and so accept greater volatility with their investments.
The questionnaire also analyses five different risk measures in order to help you better understand the client's overall risk tolerance and provides a summary of the client's results in each measure. The measures are as follows:
- Perception — how your client perceives their risk behaviour.
- Risk vs Reward — how your client views the trade-off between risk and return.
- Future Change — whether your client's attitude to risk will change in the future.
- Actual Behaviour — how your client instinctively reacts when faced with investment choices.
- Time Horizon — whether your client takes a short or long-term view to investing.
Key benefits of the ORRA Risk Questionnaire
- Quick and easy — only 15 minutes to complete.
- Paper trail — allows you to store client reports on your PC, giving evidence of client discussions.
- Designed by leading experts — you can be confident the questionnaire will help you to make informed and systematic investment decisions tailored to each client.
- Portfolio planning tools — questionnaire can be used in conjunction with the portfolio planning tools, aiding you further in determining client's investment strategies by suggesting suitable asset allocations and fund selections.
- Customised report — automatically produced for every client.
- Client education — enhancing your client's awareness of the importance of risk, and the trade-off between risk and returns.
Your client's risk tolerance is only one part of advising them on their investment strategy. To access both the questionnaire and Standard Life's Portfolio Planner please log onto www.adviserzone.com