Assessing a client's attitude to risk is all important when it comes to helping them plan for their retirement, says Lorna Blyth.
Establishing how much loss an investor could comfortably accept can be achieved by calculating their risk profile. This is split into two parts, risk capacity and risk attitude, and the two do not always go hand in hand. For example, an investor with a large pot of assets might have a low risk attitude but have a high risk capacity, as their wealth means they can afford to take on more risk than an investor with the same risk attitude but a smaller pot of assets. Likewise some investors might feel ‘better safe than sorry’ and prefer the security of cash, while at the same time understa...
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