When setting a client’s Risk Number, you have two easy choices — set a Risk Target, or use a questionnaire. We developed Risk Targets for clients you already know quite well or for advisors that prefer to start their process with goals, portfolio analysis or financial planning.
Most account opening paperwork requires the selection of an account objective, typically ranging from low to high risk. Risk Target functionality makes it simple to incorporate account objectives in a quantitative way. Simply select the Risk Target that is most aligned with the account or portfolio objective.
Or consider a long time client that has been happily invested in a “Growth and Income” portfolio throughout good, bad and indifferent market environments. In this case, an advisor is well suited to simply select a Risk Target that aligns with the stated account objective instead of putting the client through the risk questionnaire process.
In addition, Riskalyze allows you as the advisor, to document the Risk Target based on previous discussions with your clients about their goals and how much risk they need to take to meet those goals.
Confirming and Refining Risk Targets
Portfolio analysis, specifically a presentation of the 6-month probability range and corresponding Risk Number AND/OR Retirement Maps analysis can be used to confirm that the investor’s portfolio is in line with their risk preferences and goals. If something has caused a change in your client's life whether an inheritance, or an increase or reduction in income, updating the Risk Target is easy.
By clicking the UPDATE RISK TARGET button you can edit the Risk Target accordingly and then notate the reason for the change so you are always in compliance and have documentation that supports your recommendation.
Another best practice is to start all prospective clients off in a “Growth” Risk Target during the courting stage. Then have your process and other aspects of Riskalyze adjust or confirm the Risk Target. Use probability of success inside Retirement Maps, the 6-month risk/return range in portfolio analysis, and/or the risk questionnaire to help you adjust the Risk Target accordingly.
PRO TIP: The best advisors understand how Risk Targets work and when to use Risk Targets to provide the most value for clients and prospects. Check out our Riskalyze Academy Lesson for an interactive tour!