Assessing Clients’ Risk Tolerance Now With Geoff Davey of FinaMetrica: Weekend Interview

Written by James J. Green, AdvisorOne Friday, 18 March 2011

A leader in using psychometrics to assess clients’ risk profiles suggests what advisors should be telling clients now. Hint: It’s what they should always be saying simply to set up a financial plan—which he says only has a “half-life of, what, three years?”—but also to educate and reinforce the goals of the plan and the steps—including but not limited to the investments—that will help the client achieve that plan's goals.

Davey recommends that his advisor clients—the biggest users in the U.S., he says, are ‘NAPFA members, AICPA PFPs and Dimensional [Funds--DFA] users—perform risk tolerance assessments using FinaMetrica’s 25-question Web-based questionnaire, but also rerun the test every few years, as end clients’ personal situations and goals develop. Read More..