Totum

Risk Tolerance

The Dangers of Gamified and Thrill-Seeking Investing for Gen Z and Millennials

Investing has always come with some risk, and it’s understood in the financial community that the more risk a person takes on, the more they may expose themselves to both big gains, but also big losses. Today, with national news headlines of the occasional meme stock trader, NFT connoisseur, or cryptocurrency investor making six figures …

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Risk and Retirement Blog Image

The Importance of Understanding Your Risk Profile for Your Retirement Accounts

With pensions nearing extinction, most Americans have had few other options but to build their own retirement nest eggs. Many individuals have turned to their 401(k) or IRA, to build up funds, hoping it will be enough down the line when they finally stop earning an income. If you have a good portion of your …

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Why Risk Preference and Risk Capacity Need to Be Scored Separately

Risk tolerance questionnaires have traditionally consisted of questions that produce one score centered around risk preference or attitude, which advisors then use to create portfolios or record the rationale for how they match clients to specific firm models. This can often create misalignment as it may not expose the entire reality of an individual’s overall …

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Multidimensional risk capacity approach for financial advisors

Why Fact-Based Multidimensional Risk Capacity Is a Superior Approach for Financial Advisors to Profile Their Clients

Advisors have traditionally used risk tolerance questionnaires and basic timelines as the basis for portfolio recommendations. Unfortunately, these practices are riddled with flaws. As outlined below, including and prioritizing risk capacity offers a far superior method in advising clients with their investments. The Pitfalls of Risk Tolerance Questionnaires Risk tolerance, or preference, is based on …

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Portfolio Risk

How Today’s Portfolio Risk Assessment Tools Rely On AI and Big Data To Better Serve Their Clients

Traditionally, advisors were only able to capture inputs directly from their clients. This information was often very subjective and relied heavily on the clients’ feelings about investing and risk. Fact-based questions were often limited to a small set of questions, such as time horizon and availability of assets.  Even still, these “facts” were vulnerable to …

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Online risk tolerance questionnaire

Why Today’s Modern Advisor Needs Their Online Risk Tolerance Questionnaire To Be Part of an Integrated Fintech Platform

Gone are the days a risk assessment should be conducted on paper or in a spreadsheet. These processes are cumbersome, slow, and prone to inaccuracies. Recognizing these problems, the founders of Totum by TIFIN spent over five years creating a tool that integrates with leading broker-dealers and custodians, as well as complimentary fintech partners. We …

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Totum Risk Preference

Why Traditional Risk Tolerance Questionnaires Lead to Inaccurate Risk Appetite

As an advisor, you have probably been relying on financial risk tolerance questionnaires to assess a client’s risk preference. Then, depending on the client’s answers, you gear the portfolio to a more or less aggressive approach.  The problem with this method is that the questions weigh heavily on how a client generally feels about investing …

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