Your tolerance to investment risk and what it means
Understanding risk tolerance
Risk tolerance refers to the degree of risk you are willing to accept when making investment decisions.
It is a critical factor in determining the types of investment products, funds, and allocation strategies that are appropriate for you. At Crowe Financial Planning, we assess your risk tolerance to ensure our recommendations align with your financial goals and comfort level.
Why risk tolerance matters
Investment risk plays a significant role in helping you achieve your financial objectives, whether they are short-term or long-term. All investment products carry some level of risk and can be influenced by various factors such as inflation, interest rates, global economic trends, and technological advancements, including the current AI-driven boom.
Before investing, it is essential to evaluate your financial situation. Market fluctuations are inevitable and can be unsettling. Your appropriate risk level depends on your personal circumstances, your capacity to absorb losses, and your overall attitude toward risk.
There is a fundamental relationship between risk and reward. Higher risk may offer the potential for greater returns, but these returns are not guaranteed. Volatility is a normal aspect of investing, and markets will continue to experience both upward and downward movements. We adopt a long-term perspective when managing investments.
You can take steps to mitigate risk and prepare for market volatility. Some investors prefer a lower-risk approach with steadier returns, while others may opt for higher risk in pursuit of greater rewards. The choice is personal and may evolve over time as your circumstances change.
Assessing your investment risk tolerance
As a client of Crowe Financial Planning, our consultants will engage in discussions about investment risk and ask you to complete a questionnaire. This process helps us understand your risk profile and ensures that our recommendations are suitable for your needs. It is important to evaluate the level of risk you can reasonably take to achieve your financial goals.
We utilise a third-party psychometric questionnaire to assess your comfort level with investment risk. This tool considers your previous investment experience, your need and attitude toward risk, your investment time horizon, and your capacity to take risk.
Based on the results, our consultants will work with you to align your investment strategy with the appropriate risk level and product selection. This strategy is reviewed annually to ensure it remains suitable.
What this means for you
We aim to provide you with confidence and peace of mind by regularly monitoring your investments. Our annual review reports evaluate your current risk tolerance, the risk exposure of your investments, and any changes in your personal circumstances. We assess both your investment strategy and the products you hold to ensure they continue to meet your financial needs and objectives.
If your circumstances change or you wish to adjust your risk exposure, you may contact us at any time for tailored advice.
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DisclaimersCrowe Financial Planning UK Limited is authorised and regulated by the Financial Conduct Authority (‘FCA’) to provide independent financial advice. The information set out on this page is for information purposes only and is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. It does not constitute advice to undertake a particular transaction. Appropriate professional advice should be taken on specific issues before any course of action is pursued. Any advice provided by a Crowe Consultant will follow only after consideration of all aspects of our internal advice guidance. Past performance is not a guide to future performance, nor a reliable indicator of future results or performance. The value of investments, and the income or capital entitlement which may derive from them, if any, may go down as well as up and is not guaranteed; therefore, investors may not get back the amount originally invested. The Financial Conduct Authority does not regulate Trusts, Tax or Estate Planning.
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