Risk Tolerance Assessment Technology And How It Can Improve Your Client Relationships

By Mark Friedenthal

As a financial professional, you not only have to be skilled at managing investments and finances, but you also have to be able to develop strong, long-lasting relationships with your clients. Beyond just achieving the desired results, your clients are going to be looking to you for premier services and expert industry resources. In order to stand out against the competition, you might want to consider investing in risk tolerance assessment software.

What is Risk Tolerance Assessment Software?

Risk tolerance assessment software is a tool that utilizes a scientific approach in order to determine a client’s willingness and ability to take investment risk and combine them to form an actionable risk directive. This software is designed to provide advisors with a profile of their clients, and give them an idea of how to best manage the risk of their wealth and investments.

Importance of Determining Ability versus Willingness

As an advisor, your job is to provide your clients not only with financial advice but also a concrete plan of action for wealth management. You need to understand the personality of your client towards risk taking. However, identifying that a client is very willing to take risk is not enough. This same client, who knows that high risk can yield high reward, may not have the financial capacity to take those risks. This is why you need to determine both willingness and ability, as it allows you to create a customized plan that meets their needs.

Why Your Firm Should Offer Risk Tolerance Assessment Tools to Clients

In an age where wealth management is critically important, clients are looking for financial advisors who can help them maneuver through the complexities of the investment markets. When you offer risk tolerance assessment tools and promote the scientific approach that you use, your clients will be impressed with your commitment to personalized service. In addition, the results will make your clients confident in your skills and abilities, allowing you to sustain relationships for years to come.

The fact of the matter is, most advisors attempt to complete a risk tolerance assessment survey with their clients. However, the majority of these risk tolerance assessment questionnaires do nothing more than scratch the surface. The average result is that the client is willing to take on a “moderate” level of risk, which is a vague description that can mean different things to different advisors and different investors. By assessing both the willingness and ability of the individual client, you are able to use scientific results in order to determine a concrete plan of action that suits the needs and desires of the client you are working with at the time. It’s the tool you need to not only promote your business, but also to instill confidence in your clients that results in long-term professional relationships.

Mark Friedenthal is the founder and CEO of Tolerisk®, a risk tolerance assessment tool that is created for financial advisors and those in the wealth management industry. Prior to launching Tolerisk®, Friedenthal founded Friedenthal Financial, where he worked as an investment advisor for private clients.

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