Risk

In our highly regulated “Financial Services” area – Planners, Advisors, Accountants, Insurance Agents, Tax Agents etc – one word that’s bandied around but widely misunderstood is “risk”. One definition that you will rarely if ever come across is that “risk” or “risky” is the opposite of “certain” or “certainty”.

Financial advisors are not allowed, by law, to give advice without establishing the “risk profile” of the potential investor. In the financial world it’s obvious that every dollar gained or lost can be quantified but financial planners are not qualified psychologists so are unable to assess their clients capacity for risk and then use that assessment to tailor the advice they prepare.

Basically this only establishes, with dramatic imprecision, the expected feelings that the would be investor might have if the investment doesn’t meet expectations.