FE has been supporting the financial advice sector for over 20 years. In our second in-depth research report of the financial advisory industry we look at how Advisers use and mitigate risk. Risk is a complex concept for financial advisers and their clients alike, and our research shows many firms find the challenge of communicating and managing it problematic.
This report was commissioned with a view to helping better understand the ways in which the financial advice community measure risk, uses it in portfolio construction and communicates the concept to clients. It highlights both the growing professionalism of the industry and some significant inconsistencies which need to be better understood.
Our report suggests that many advisers adopt a patchwork approach to managing risk in their clients’ portfolios. A picture emerges of an advisory sector that focuses on volatility above all other types of risk and relies on attitude to risk questionnaires while often overlooking many of the other tools available to advisers to manage the other multiple risks their clients face.
We hope this report contributes to the debate around how the wider investment industry can support advisers who want to manage risk proactively and gives food for thought for advisers looking to improve their engagement with clients on the topic. It is a complex subject, but an essential one if clients are to achieve their investment goals and have a clear understanding of the potential gains and losses they may make.
This report comprises data from questionnaires completed by 210 advisers in the period (December 2016 to January 2017), as well as other market data from FE.