Does the industry overestimate the importance of volatility?

"A lack of appreciation of risk leads to great disasters," Morningstar Investment Management chief investment officer Daniel Needham told delegates at his company's annual conference. No fit and proper financial adviser would disagree with that. Advisers have to determine at least two types of risk to stay the right side of the regulator; a client's attitude to risk, and for investment advisers, the pros and cons of a vast (and getting larger) range of products and schemes that investors can put their money into. But what if the main tool being used to measure investment risk is wrong...