The ol' bird-in-hand theory: new considerations on risk appetite

Now that the Retail Distribution Review (RDR) has arrived, one of the key areas of impact is client suitability. The RDR requires advisers to perform more stringent suitability checks, chiefly consideration of how much risk a client is “willing and able to take”. It therefore seemed an apt time to remember what the FSA says about an investor’s 'capacity for loss' and attempt to address a common misconception that capacity for loss is little different to 'risk appetite'. Any investment is subject to fluctuations in value: the magnitude of these fluctuations depends largely on - and ...