Tip of the Week

The Risk of Being Risk Averse – and What to do About it

Clients are not robots; both their needs and attitudes change with time. Take, for example, an individual who has been a risk-taker during her entire working life, but as the terror of no longer receiving a paycheck in retirement sets in, she becomes risk averse. Or consider the young client who is at first risk averse due to his lack of financial knowledge and the maturity that comes with age, he comes to accept and even embrace risk. In both cases, the financial advisor must stat attuned to not only the client’s behavioral risk profile, but also changes in that profile. The tools are out there for the advisor to assess the client’s aversion to risk; help him or her to understand the behavioral risks involved; and solve the challenge with information, products, and services.

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