Client and Planner Attitudes, Values, Biases and Behavioral Finance

Question 1

Risk tolerance vs Risk Perception vs Risk Capacity

Answer 1

• Risk tolerance - the measure of financial risk a client is willing to take/tolerate
• Risk capacity - An indivdiual’s ability to take risk based on their current financial resources/situation
• Risk perception - An indivdual’s perceived sense of potential loss from an investment (how risky they think something is)

Question 2

Risk needed (risk required)

Answer 2

The amount of risk required to take in order to meet a client’s goals

Question 3

Tactile (kinesthetic) learners

Answer 3

• learn best through touch/feel
• Allow them time to write stuff down
• Allow them time to process or even conduct simple calculations
• Run through scenarios in real time with these clients