Why risk profile?

Risk profiling, compliance and the FCA

FCA good practice says:

  • Firms should satisfy themselves that they engage customers in a suitability assessment process which acts in the best interests of those customers.
  • They must have a robust and flexible process for ensuring investment selections are suitable given a customer’s investment objectives and financial situation (including the risk they are willing and able to take) as well as their knowledge and experience.

Click here to read the FCA paper

The 6 steps to risk profiling

The Dynamic Planner risk profiling process has been used by financial planning firms since 2005 to help identify both their clients’ attitude to risk and how much risk they can afford to take.

It is suited to the majority of individual adult UK investors and their partners.

For those with significantly large investable assets additional factors need to be taken into account, such as properties or privately held company shares that are significantly large in value.

Financial planners typically follow six steps when creating an investor risk profile.

These steps help to build a deeper insight into your clients’ requirements and ensure that each final outcome is an accurate and fair reflection of the risk profile as well as capacity to tolerate possible losses.

Learn more about the steps here:

  1. Review existing portfolio
  2. Assess attitude to risk
  3. Check consistency of answers
  4. Assess capacity for risk
  5. Confirm value at risk
  6. Match portfolio against goals

Web Profiling Process Diagram