Don’t Let Risk Tolerance Questionnaires Kill Your First Client Impression

Recently a friend of mine, an experienced advisor, convinced another mutual friend to move his assets. Before the first meeting, the advisor gave our friend a standard risk-tolerance questionnaire on paper. Shortly after, the prospective client returned the blank questionnaire and made it clear that the advisor would have to do better to manage his money.

Lucky for the advisor, he emailed an interactive questionnaire. Concise yet comprehensive, the digital risk questionnaire asked easy-to-answer questions that dove into household finances and lifestyle factors such as employment, geography and health.

The client responded much more favorably to the second approach, since the more in-depth and relatable questionnaire produced a complete view of a client’s true risk capacity. It helped the advisor create a portfolio that took into consideration multiple factors such as family dynamics, changes in financial responsibilities, and location. By understanding and quantifying these unique characteristics, or “human capital factors,” the advisor applied one of his model portfolios that met how much risk was appropriate for the client.

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