The Problem With Traditional Risk Questionnaires
For decades, financial advisers have relied on risk questionnaires to gauge how much investment risk clients should take. You've probably completed one yourself - questions like "How would you feel if your investments fell 20%?"
But here's the problem: how you think you'd feel is often very different from how you actually feel when it happens.
Did you know?
The Gap Between Theory and Reality
Research consistently shows that:
- •
People overestimate their risk tolerance in bull markets - When everything is going up, we feel invincible
- •
They underestimate it in bear markets - When markets crash, even "aggressive" investors panic
- •
Past experience heavily influences current attitudes - Someone who lost money in 2008 will answer differently to someone who started investing in 2020
- •
Answers change depending on how questions are framed - The same question asked differently can produce opposite results
Important
A Better Approach
At Altor, we believe in going beyond the questionnaire. Our approach combines multiple factors to truly understand your relationship with risk:
1. Capacity for Loss
This isn't about feelings - it's mathematical. Can you afford for your investments to fall without affecting your lifestyle or goals?
We analyse your income, expenses, existing assets, and time horizons to determine how much volatility you can actually withstand.
2. Need to Take Risk
If you can achieve your goals with lower-risk investments, why take more risk than necessary?
Tip
3. Behavioural Understanding
Through ongoing conversations, we learn how you actually respond to market movements, not just how you think you would.
This is why regular check-ins matter - we observe your real behaviour over time.
4. Goal-Based Planning
Different goals might warrant different levels of risk:
| Goal | Typical Risk Approach |
|---|---|
| Emergency fund | Very low risk - needs to be stable |
| House deposit (2-3 years) | Low to medium risk |
| Children's education (10+ years) | Medium risk |
| Retirement (30+ years) | Higher risk acceptable |
The Standard Life Advantage
As a Standard Life employee, you have access to Altor's comprehensive risk profiling as part of your benefits package. This goes far beyond a simple questionnaire to truly understand your financial personality.
Key Point
Complete your risk profile today through the app, or book a session with an adviser for a deeper conversation.
