Following COVID-19, risk profiling as a tool has become more important than ever. Coronavirus has shown us again that market downturn is sudden, and it is not always a straight line up for market growth.
The COVID-19 downturn was a scary and confusing time for all investors and deciding what to do and when to do it is a challenge. The events of this pandemic have made clients reconsider again what their true tolerance for risk is and with the support of an adviser correctly going through a risk profile will allow them to ensure they are positioned correctly in the market to meet their risk appetite.
The risk profiling tool also allows the adviser to better understanding the needs and wants of their client providing another tool to build a great relationship. Typically, in situations like this it is more about time in the market than trying to time the market. Hanging on the for the long run and investing extra funds when the market inevitably bottoms out will typically lead to the most success, however ensuring you are in the correct investment structure is a pre-emptive tool for success.
The inevitable variation and clash in client’s goal, risk capacity and risk tolerance will happen and combating client biases will be the true challenge for advisers following COVID-19. Clients will have a preconceived opinion on where they believe they should be invested but this will not always match the results of where they should realistically be.
With the correct support from an adviser clients will be able to find the optimal investment structure, allowing for them to become more confident and comfortable with investing. The correct answer is never black or white and every option has its draw-backs. One thing is certain though; following COVID-19, clients are going to consider more defensive options.
If you require advice on risk profiling, contact our friendly team today.