Risk profiling sits at the core of financial planning and is absolutely fundamental for determining an appropriate investment strategy for our clients.
Aims of risk profiling
The risk profiling process presents a unique opportunity to thoroughly examine the relationship between risk and return, and to ensure the suitability of investment advice. The intended result is a client who fully understands and is comfortable with the potential outcomes of the portfolio they have invested in, as it has been matched to their risk tolerance.
There is often a mismatch between the level of risk that someone needs to take to achieve a goal (risk required), the risk they would prefer to take (risk tolerance), and the risk that they can actually afford to take (risk capacity).
Rather than being a ‘one-off’ event, the risk profiling process needs to be revisited on a regular basis. This ensures that a particular investment strategy not only remains suitable with regards to a client’s goals, but is also consistent with their capacity for loss and risk tolerance.
Your risk profiling report
Walden Capital uses an internationally acclaimed risk profiling system called Finametrica. Based on psychometrics (the blending of psychology and statistics), Finametrica is a web-based system which has been used by 650,000 individuals since 1998.
When instructed by us, the system will invite you via email to answer 25 questions that will take about 15 minutes to complete online. You will then receive an instant risk profiling report placing you in one of seven numbered risk groupings (see illustration below).
We will discuss your report at your Discovery Meeting with Walden Capital and these findings, combined with our own statistical analysis of the data produced, will help decide which of our volatility-based model portfolios is most appropriate to meet your needs.