The most common way for financial advisers to assess the right financial product for you is to use a risk profile questionnaire. This survey asks a series of questions with different financial outcomes. Your response is graded, and the score classifies your attitude to risk from conservative to balanced to growth.
Based on this questionnaire, the adviser will suggest an investment mix. Because the answers you give in this questionnaire forms the basis for the financial advice you will receive, if you don't provide accurate details, they might not be held accountable for the advice you are provided.
Why wouldn't I provide accurate details? The challenge of risk profiling is that your attitude to risk might be different from your capacity to manage risk.
You might not like the idea of losing money and prefer a guaranteed, lower return investment over a more volatile but potentially higher return investment. This is an attitude towards risk.
However, you are 30 years of age and your investment is held within superannuation. Your capacity to manage risk is very high. You can easily manage short-term losses because you have 35 or more years of working income ahead of you and cannot draw down your super in the short term.
If you invested your super in a conservative portfolio of defensive assets based on your attitude to risk, you might end up retiring on significantly less than you would have invested in a growth fund aligned to your capacity to manage risk.
Both your capacity and your attitude to risk need to form part of your financial decision making.
Want to know more?
- What is risk?
- First financial advice meeting free
- What else might the adviser ask me about? (Client Questionnaire)
General advice disclaimer
This is general information only and does not take into account your personal objectives, financial situation or needs. You should assess whether the information is appropriate for you having regard to your objectives, financial situation and needs and consider obtaining independent professional advice before making an investment decision. If information relates to a specific financial product you should obtain a copy of the product disclosure statement for that product and consider that statement before make a decision whether to acquire the product.