Risk assessment process Risk assessment is a continuous three stage process; the initial client meeting, the initial reporting stage and the annual investment planning reviews. Initial client meeting Clients should be taken though the risk assessment process at the initial meeting. They should be left with a copy of the assessment which should include the information used to conduct the assessment. Online assessment requires a more involved interaction of education and assessment than is currently offered by the market. If the client data is already within the system, risk assessment can be an interactive process with illustrations of the risks and consequences of risk preferences. Initial reporting stage The initial report reinforces points discussed during the risk assessment process. It will state how the portfolio will be structured and managed and will assess the ability of assets to meet needs within the constraints set by the client’s risk profile, assets and liabilities. If the client’s assets are insufficient to meet needs over time the client may need to reassess their risk preferences or financial demands. The report provides the client with concrete illustrations of the structure of the portfolio, the security provided by the portfolio over time, the initial investment strategy and an explanation of the function of each of the assets within the portfolio. The report should state the allocation of the portfolio as it relates to risk aversion and current market conditions, the nature of the equity portfolio and its risk profile over time. Analysis of the equity portfolio will explain to the client the risks of the portfolio and what to expect from the portfolio over time as a consequence of management style and natural investment risk. The follow up meeting to discuss and implement the report provides the client with an opportunity to question and the organisation to reinforce both message and fully establish the client risk profile on which the client’s portfolio and financial needs will be managed. It is here that the actual recommended portfolio is provided and the actual structure and risk of the portfolio detailed. It is here where the client is able to assess and accept of the risks and potential returns of the recommended portfolio as defined by the risk assessment. Annual investment planning reviews At each investment planning review client risk assessment is restated and related to portfolio structure, management, performance and market conditions. At each review the client learns more and more about your process and becomes more and more dependent on you. Risk assessment and education are key service components and represent an investment in the client, the client portfolio manager and the wealth management process.
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