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Risk Tolerance Questionnaires – Why Bother?

Assessing tolerance for risk is one of the most important, and necessary, first steps to take in your relationship with your Stifel Financial Advisor. Beyond this first step, revisiting your risk tolerance at least annually is equally important.

There are many reasons for this. Understanding the types and amount of risk you are willing to shoulder will serve as a guide as your Stifel Financial Advisor recommends investments for your portfolio.

Building a portfolio consistent with your stated risk tolerance helps both you and your Stifel Financial Advisor manage expectations for things like returns, volatility, time horizons, liquidity, etc.

You and your Stifel Financial Advisor should complete a risk tolerance questionnaire at least annually or anytime you experience a significant life event. Completing a new questionnaire should be a mandatory part of your annual review. Compare the answers to previous years to see if any shifts have taken place. You may discover that your answers vary depending on current market conditions. This potential variance is an excellent talking point in a conversation about risk and the management of expectations.

Utilizing reports, such as retirement projections, gives us an idea of whether a portfolio, constructed according to your risk tolerance, will potentially allow you to meet your financial goals and objectives.

It is certainly not uncommon to realize that if you would only tolerate more risk you would have a greater probability of meeting your goals and objectives. However, taking on or tolerating more risk is never the answer. The answer is to let your stated tolerance for risk help manage expectations.

Instead of taking on more risk, talk to your Stifel Financial Advisor about reevaluating goals and objectives based on what is realistic given your risk tolerance. This may mean working longer, saving more, or readdressing your retirement spending goal.

As you pursue your financial goals, make sure risk tolerance questionnaires are an important part of your relationship with your Stifel Financial Advisor.