Describing Risk To An Investor

Advisor.ca posted an interesting article discussing Know Your Client information the other day. I think it's definitely worth reading through: http://www.advisor.ca/news/article.jsp?content=20070607_140517_4976.

I thought the comment by Teresa Black Hughes about '...absolutely no consistency.' was the best comment of the article concerning the state of KYC forms in the industry, but I think it works equally well to describe the answers given by the advisors quoted in the article.

It's pretty clear no one really seems to know how to describe the potential for downside risk to their clients. All the suggestions from advisors were canned lines given to clients. No measurable facts. For example - 'what if you lose $120,000? How would you feel?' Client's typical answer is probably 'Bad, let's take less risk!' but the client's answer should be 'How likely is it I could lose $120,000? How likely is it I lose any money at all over the next year? How about the next quarter?'

What if a client did ask those questions? How do you think the average advisor would answer? Wouldn't it be a lot better if the advisor could present real facts to clients BEFORE a purchase is made?

Tools built into OASIS make accurate risk assessment of any portfolio simple and quick. We use graphical representation to make explaining risk to clients straight-forward and understandable. Compliance Net ties the whole process together so advisors and compliance departments are always talking the same language. Using PureLogix Corp. solutions lets the client decide how much risk they are comfortable with before the purchase is made.