TheFinancial Planning Association(FPA) has criticised planners who term client risk profiles as either ‘conservative’ or ‘aggressive’, arguing that such an approach cannot qualify as tailored advice.
An FPA risk profiling paper released today says that clients may exhibit internal conflict between the goals they wish to reach and ‘stomaching’ the risk involved to achieve those goals.
FPA acting chief executive June Smith says, for example, it may be in the best interest of a client to adopt a high growth strategy to fulfil retirement needs, although personally they may prefer a more defensive strategy.
“Financial planners need to weigh these conflicts with each client,” she says.
The paper says it is not a financial planner’s role to help clients avoid risk, but instead recommends more thorough assessment of a client’s risk tolerance through communication.
Centrestone Wealth Advisors chief executive Robert Keavney says his business has seen no evidence that risk assessment questionnaires are able to predict a client’s response to future events.
“Our belief is that few clients are comfortable with excessive volatility and none enjoy shocks or outright loss,” Keavney says.
“Consequently our approach is to educate clients about the realistic risks they face and to remain in close contact with them to monitor ongoing levels of concern or anxiety,” he says.
Along with the risk paper, the FPA has also announced it will commence a summer school, beginning in December 2003, to fast track students through the education courses it provides.
This will allow students to study courses such as the Diploma of Financial Planning or to get a head start into the new full Advanced Diploma of Financial Services (Financial Planning), which will be offered ahead of the rest of the market by the FPA from first semester 2004.
General manager of FPA Education, Chris McMillan says the more flexible nature of the summer school will allow students to decide when studying is best for them.
