Question 1

What is risk tolerance and why do we measure it?

Accepted Answer

Risk tolerance is how emotionally comfortable a person is with taking financial risk – for example, how much they are willing to see their portfolio decline in pursuit of greater returns. It is psychological in nature and best measured with a psychometric tool. By understanding how comfortable a client is with investment ups and downs, advisers can set expectations clearly from the start – so clients stay the course, and don't panic when markets move.

Question 2

How do I use the FinaMetrica Risk Tolerance Toolkit?

Accepted Answer

Step 1 – Complete the profile Invite your client to complete the risk tolerance questionnaire in their own time. If you're working with a couple, have them complete it individually – it's remarkable how differently partners can score. Step 2 – Make the very first conversation count Use your client's risk tolerance profile to demonstrate more value, win trust faster, and show how your advice is tailored to them specifically – without creating more work for you. Step 3 – Build the right portfolio FinaMetrica Risk Tolerance Toolkit lets you navigate expectations and build portfolios you know clients will be comfortable with – including differences between couples – long before there's ever a problem. Step 4 – Ride the ups and downs Markets may drop but your clients' confidence won't. Return to the toolkit to help manage expectations when portfolios change – so clients make fewer panicked calls and stay confident in your advice. Step 5 – Adapt to life changes Weddings, divorces, windfalls, setbacks – when circumstances change, FinaMetrica helps ensure your client's trust in your advice doesn't.

Question 3

What makes FinaMetrica a valid and reliable measure of risk tolerance?

Accepted Answer

With over two million risk tolerance profiles completed across 20+ countries, FinaMetrica has built one of the most trusted and rigorously tested risk profiling methodology available.

Question 4

How is FinaMetrica's methodology scientifically validated?

Accepted Answer

Risk tolerance is a psychological trait — best measured using a psychometric tool that ensures validity and reliability. FinaMetrica risk tolerance profile meets international standards, with a reliability score of 0.9 out of 1. This psychometric integrity ensures accurate mapping of risk tolerance scores to investment portfolios. See our certification from the UNSW Read our technical manual to verify our psychometric qualities Use our Due Diligence Checklist — prefilled for FinaMetrica, so you can compare with confidence

Question 5

How does FinaMetrica map risk tolerance to investment portfolios?

Accepted Answer

There is often a gap between the level of risk your client is comfortable taking and the risk required to achieve their goals. To identify and resolve that gap, you need an apples-to-apples comparison between risk tolerance and investment risk. FinaMetrica uses the percentage of growth assets in a well-diversified portfolio as the parameter to make that comparison — giving you a clear, evidence-based foundation for every portfolio recommendation. Read our Asset Allocation Mappings Guide

Question 6

How does FinaMetrica help manage client expectations around risk and return?

Accepted Answer

Most clients start with unrealistic expectations about risk and return. Left unaddressed, those expectations become a source of disappointment and damaged trust. FinaMetrica Risk and Return reports give clients plain-English details of what to expect — linked to over 40 years of month-by-month historical portfolio performance. At a glance, you can show clients how representative portfolios would have performed against their own risk tolerance score. Read our Risk and Return Guide

Risk tolerance profiling that creates clients for life

A rigorous, academically validated measure of risk tolerance

Tried and trusted

Happy clients are valuable clients

A tick in every box

Flexible and efficient for your practice

Frequently Asked Questions