As part of the investment process, we establish with our clients a risk tolerance. This is the amount of risk reflected in the fluctuation in the value of their investments they are comfortable with.
This takes into account personal circumstances including investment timescale and income requirements. In addition as part of this process, we utilise an independent risk
profiling system developed by FE Analytics, one of the leading experts in the field of risk profiling, portfolio construction analysis, and fund research. This process also examines the returns a client is expecting compared to typical bank deposit accounts and what short term volatility they are prepared to take to achieve these returns. An important part of the process is examining with our clients if these requirements are realistic. For example if a client wanted low volatility with a very high return this would require further discussion - historically higher returns can only be achieved by accepting greater risk/volatility.
Taking into account all the above factors we agree a risk category for our client. The higher the risk category the more willing a client is to take a higher level of risk when making financial decisions and so accept greater volatility in their investments.