wealtheducation-what_is_risk

What is Risk Profile?

Whenever in investing, a Risk Profile is a series of questions that determines your ability to take certain types of risk when investing in certain investment instruments.

Usually before you purchase any investment products with a financial institution, you need to be assessed by a Risk Profile questionnaire. It is a set of about 8 to 12 questions, depending on the design of the questionnaire with each financial institution.

A risk profile is good to ascertain where are you most comfortable in taking risk. When all the questions are answered, the scores will be tabulated and presented to you. Then the adviser that assessed your risk will consult and go through whether you are suitable for the kind of financial instruments you have decided to purchase.

If your risk profile is not suitable to purchase the financial instrument, the adviser would give an alternative, or if you insist that you want that product, you must make it clear to the adviser and sign on the risk profile test to confirm your intentions.

Therefore a Risk Profile is also a disclaimer tool for the financial institution when it comes to financial product recommendations.

What is Risk?