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Valid and Reliable Risk Tolerance Questionnaires

The introduction of the FAIS Act changed the rules of the game as far as programmes used to determine client needs, are concerned. Perhaps it is more accurate to say that it should have changed the tools, used by advisors.

In the good, bad old days, selling a policy was the objective, rather than the provision of the information a client required to make an objective decision. In the company I worked for at the time, the MD’s mantra was: everything starts with the sale of a policy. Everything was geared towards this objective, and means, fair and fowl, was employed to achieve it.

A glance at determinations by the FAIS Ombud leaves little doubt as to the precarious position the modern day advisor finds him- or herself in these days. When all else fails, they pull out the “due care and diligence” shotgun and blast your defence to pieces.

Perhaps we should take a leaf from the regulator’s handbook and see what other countries are doing.

I subscribe to a magazine published by FinaMetrica, an Australian risk profiling specialist company, operating internationally. Their latest edition discusses how you can determine the validity and reliability of programmes you may currently be using.

It also contains several other, very educational articles from leading investment publications.

Please click here to access the full document.

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