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What comes to mind when you think of risk? Danger? Uncertainty? Opportunity? Thrill? Risk means different things to 
different people, and each of us has our own comfort zone and appetite for risk. Some people are attracted to the thrill it provides, and these folks may choose to climb high mountains, drive racecars or sail solo around the world. Others, however, may view these activities as extremely dangerous and would never participate in them. The rest of us fall somewhere in between. There is risk in any situation where there is uncertainty of outcome. The level of risk a person will normally choose is best thought of as a continuum ranging from risk-avoiders to risk-seekers. This is also true for tolerating financial risk.
As your wealth management adviser it is important for us to understand your specific risk tolerance, or the level of risk at which you are comfortable. This, along with understanding your financial goals, time horizons and risk capacity (i.e., your ability to sustain a market decline without suffering an unacceptable loss of lifestyle now or in the future) all go into ensuring that the most appropriate FIM Group investment strategy is selected for you. Said another way, risk “tolerance” addresses your emotional requirements, and all the rest is about the financial requirements for achieving your long-term goals. Often the emotional and financial requirements are aligned. At times, though, they may be at odds, such as when a higher level of financial risk is required to reach a specific financial goal. When this occurs, the alternatives to consider, either individually or in some combination, are: take on more risk, invest more, or delay or reevaluate your goals. Generally, though, we don’t recommend taking on any level of risk greater than you’re comfortable with, since that may lead to sleepless nights, panic or making irrational investment decisions (like selling at or near market bottoms).
Risk tolerance has been the subject of numerous research studies. It is now believed that risk tolerance is a psychological trait that can be measured and is relatively enduring. To assist with assessing a client’s specific risk tolerance, FIM Group recently began utilizing a test developed by FinaMetrica, an Australian company. The test is comprised of 25 multiplechoice questions and takes about 15 minutes to complete. This is a highly respected tool and is considered to be one of the best for judging the psychological aspects of financial risk.
If you would like to complete the assessment, please contact your local office. You will receive a detailed report on the results, and a copy will also be provided to us. For couples, it is recommended that each person takes the test in order to best assess and accommodate the joint decisionmaking process.
The FinaMetrica risk assessment is not a substitute for an in-depth risk profile discussion between a client and adviser, but it does serve as a useful tool for providing an objective and more focused discussion.
To learn about wealth management advice from the best wealth management firm, Financial & Investment Management Group -more please visit www.FIMG.net or call 800.632.5528.
