Risk assessment

Before taking on any wealth management scheme it important to assess risk with clients and evaluate the capacity for any loss. And the Financial industries regulator the FCA's is concerned to make sure risk profiling is conducted properly and thoroughly.

One of the things that they are particularly concerned about is that there are many tools out in the market and how some advisors are using them,  they are particularly worried with respect to the weightings applied, the questions asked of the client and an over-reliance on the tool as a replacement for the adviser's view of the client's attitude to risk and capacity for financial loss.  In other words, some firms are not assessing the appropriateness of the tools and are relying on these tools to deliver a one-size-fits-all solution.

The FCA is clear that advisers must ensure the product is suitable for the client given the client's "real" attitude to risk and capacity for financial loss and ask: Does the automated tool allow for flexibility in responses? Is the tool too formulaic? Do you understand how the tool is constructed?

Are the questions within the tool contradictory? Do the advisers gather all relevant client information? What happens when the results of the tool do not accord with what the client is telling the adviser?What are your complaints telling you about the manner in which risk is assessed?

At Enable our experienced IFA’s make sure any assessment of a client's attitude to risk and capacity for investment loss is not solely determined by a risk-profiling tool but also depends on a richer understanding of any client’s needs and interests.

Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE