A successful client-adviser relationship is characterized by the planning, construction, and selection of the most optimal portfolio for the client. This involves staying the course, bolstered by solid communication between both parties. The first logical step is to have the client fill out a risk tolerance questionnaire.<\/p>\n
Four traits of successful client-adviser relationships<\/strong>:<\/p>\n During the initial stages of a client-adviser relationship, the adviser should administer a risk tolerance questionnaire. The adviser should use the questionnaire to assess the client\u2019s attitude toward risk. Further, it is recommended that this questionnaire be re-administered annually during an IPS update.<\/p>\n While not a perfect solution, risk tolerance questionnaires represent a reasonable first attempt to get to know a client. Advisers should be aware of the following challenges associated with administering and using these questionnaires:<\/p>\n Which of the following is most likely<\/em> to be accurately captured by a risk-tolerance questionnaire?<\/p>\n The correct answer is C<\/strong>:<\/p>\n Traditional risk tolerance questionnaires are more appropriate for institutional investors than individuals since they employ a cognitive approach when investing. It is noteworthy that the cognitive approach gives a better understanding of risk and returns.<\/p>\n A is incorrect<\/strong>: Framing bias would potentially affect how a risk tolerance questionnaire is answered.<\/p>\n B is incorrect<\/strong>: Behavioral biases are less likely to pop up on risk-tolerance questionnaires since they are more emotional and do not lend themselves to qualitative assessment.\u00a0<\/p>\n<\/blockquote>\n Reading 2: Behavioral Finance and Investment Processes<\/p>\n LOS 2 (b) Discuss how behavioral factors affect adviser\u2013client interactions <\/em><\/p>\n","protected":false},"excerpt":{"rendered":" A successful client-adviser relationship is characterized by the planning, construction, and selection of the most optimal portfolio for the client. This involves staying the course, bolstered by solid communication between both parties. The first logical step is to have the…<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[571],"tags":[],"class_list":["post-27420","post","type-post","status-publish","format-standard","hentry","category-cfa-level-iii","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"\n\n
Risk Tolerance Questionnaires<\/h2>\n
\n
\n
Question<\/h2>\n
\n
Solution<\/h4>\n