Assessing a Client's Risk Profile: A Review of Solution Providers

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The Journal of Financial Service Professionals
The purpose of this paper is to provide financial advisors with an overview of the different ways a client’s risk profile can be measured and assessed. The paper begins by providing a definitional framework to help financial advisors better understand the similarities and differences between and among concepts such as risk tolerance, risk preference, risk need, and risk profiling. Next, information based on interviews of representatives from several risk profiling firms is presented. Based on these interviews and an assessment of each firm’s risk profiling methodology, risk profiling tools are classified as being (a) comprehensive, (b) subjective, or (c) asset allocators. Guidance on the use of risk profiling tools is provided, as well as a discussion about the need for more policy guidance on the topic of risk assessment.
finance, financial planning, risk profile, policy guidance, risk managment