Investor Risk Profile

Investor Risk Profile

Your attitute to risk is probably the most important factor to consider before investing Risk/ return trade off
Higher returns = Higher risk of capital loss Funds and assets that offer higher returns are generally more volatile

As a financial advisor you will recommend to your client investment strategies to match their investments to their risk profile

7 steps of personal financial advice

Step 1- Establish a relationship with the client 1Step 2- Identify the clients personal needs, 2goals and expectations Step 3- Research and analyse client situation 3Step 4- Develop Statement of Advice detailing 4recommendations Step 5-Present advice, negotiate and seek 5agreement Step 6- Implement agreed plan 6Step 7- Provide ongoing services as requested 7-

Step 2- Identify the clients personal needs, 2goals and expectations

Risk Profile

Diversification
Investing across the various investment sectors according to your risk profile
Eg Instead of inveting only in shares or only in property you might invest a proportion in both, or even include cash or fixed interest to create a balanced portfolio

Information required to determine the appropriate mix of assets to invest in you need to know the following:
Risk profile Investment Goals Timeframe

Assessing your attitude to risk & what investments are best suited to you

Question 1 If my investment value fluctuated by more than 20%, I would find it hard to sleep at night Score 1 2 3 4 5 Strongly Agree Agree Neutral Disagree Strongly Disagree Client 1 Client 2 Joint Score

Question 2 I am willing to accept more risk to possibly achieve higher returns and reach my goals Score 1 2 3 4 5 Strongly Disagree Disagree Neutral Agree Strongly Agree Client 1 Client 2 Joint Score

Question 3 If you had an investment Portfolio, how often would you rerearrange it? Score 1 2 3 4 Any loss of value Less than 3 years 3-5 years Whenever my investments go up significantly 5 years or more Client 1 Client 2 Joint Score

Question 4 I am willing to experience the ups and downs of the market for the potential of greater returns over the long term

Score 1 2 3 4 5 Strongly Disagree Disagree Neutral Agree Strongly Agree

Client 1

Client 2 Joint Score

Question 5 Which of the following best describes your attitude to financial risk Score 1 2 3 4 5 A very low risk taker A low risk taker An average risk taker A high risk taker A very high risk taker Client 1 Client 2 Joint Score

Question 6 Which statement best describes your understanding of financial markets and investments
Score 1 2 3 I am not familiar and have little interests in them I am not very familiar I have had enough experience to understand the importance of diversification I understand that markets may fluctuate and that different market sectors offer different income growth and taxation characteristics I am experience with all investment sectors and understand the various factors that influence performance Client 1 Client 2 Joint Score

Question 7 My main concern is security. Keeping my money safe is more important than earning high returns Score 1 2 3 4 5 Strongly Agree Agree Neutral Disagree Strongly Disagree Client 1 Client 2 Joint Score

Question 8 How do you normally feel after you have made a significant financial decision? Score 1 2 3 4 5 Very concerned Concerned A little uneasy Content that I have made the right decision Optimistic that the decision Ive made will provide substantial benefits Client 1 Client Joint 2 Score

Question 9
Investments that have experienced high volatility have generally compensated investors with higher returns over the long term. If you could invest in a portfolio between 10 and 20 years, which of the following would most suit you? Score 1 2 3 4 5 A portfolio that may have a ve return every 15 years but a range b/w 0.2% and 9.1% pa A portfolio that may have a ve return every 8 years but a range b/w -1.1% and 12.01% pa A portfolio that may have a ve return every 5 years but a range b/w -2.5% and 15.3% pa A portfolio that may have a ve return every 5 years but a range b/w -2.9% and 16.3% pa A portfolio that may have a ve return every 4years but a range b/w -4.2% and 18.9% pa Client 1 Client Joint 2 Score

Total Score
1. Add Up totals for each question and write

the total for each client or for joint as appropriate 2. According to the following information, what is your risk profile

Your score your risk profile

3838-45 Aggressive  A very high risk taker
Prepared to compromise portfolio balance to pursue potentially long returns Investment choices are diverse, but carry with them higher level of risk Security of capital is secondary to potential for wealth accumulation

Your score your risk profile

3131-37 Moderately Aggressive  A high risk taker
Earning sufficient income to invest more funds into capital growth Prepared to accept higher volatility and moderate risks Primary concern is to accumulate assests over the medium to long term Require a balanced portfolio, but investments that are more aggressive may be included

Your score your risk profile

2424-30 Balanced  An Average Risk Taker
Balanced investor Diversified portfolio to work towards medium ti longlongterm financial goals Required to work towards medium to to long term financial goals Require an investment strategy that will cope with the effects of tax and inflation Calculated risks will be accepted to achieve good returns

Your score your risk profile

1717-23 Moderately Conservative  A low risk taker
Seek better than basic returns Low risk Typically older investor seeking to protect wealth accumulated May be prepared to consider less aggressive growth investments

Your score your risk profile

9-16 Conservative  A very low risk taker
Risk must be very low Prepared to accept lower returns to protect capital Not concerned about the negative effects of tax and inflation as long as the initial investment is protected