Attitude to Risk Questionnaire - Retirement

Transcription

1 Attitude to Risk Questionnaire - Retirement Things to think about before investing How much can you afford to invest? How long can you afford to be without the money you ve invested? What do you want your investment to provide capital growth (your original investment to increase), income or both? How much risk and what sort of risk are you prepared to take? Are you happy to go it alone, or do you want to share costs and risks with other investors? What are the tax implications? A guide to investment risk The tendency for investments to rise or fall in value is known as volatility. Volatility is the opposite of stability. The more volatile an investment, the more extreme the rises and falls in its value. This means that there is more chance of extreme losses, but also potentially higher gains. Lower volatility means greater stability and less chance of an extreme fall in price, but also less chance of higher gains. However, the longer you hold an investment, the lower the impact of that volatility. Helping you find a portfolio that reflects a comfortable balance between potential gains and falls in value requires finding your risk benchmark. Your adviser will discuss this in detail with you in relation to your specific goals; for example how would you feel if your goal was not achieved? To help ascertain your risk benchmark, please complete this questionnaire, ensuring all questions are answered. Remember that when considering different investment goals (e.g. school fees versus saving for retirement); you might answer the questions differently so please ensure that your answers relate to the particular investment in question only. The resulting benchmark risk score will be between 1 and 10, with 1 being the most stable and 10 being the most volatile. A risk score of 1 will result in a portfolio consisting mostly of cash, while a risk score of 10 will indicate a portfolio heavily weighted in shares. Scores between 1 and 10 will feature a broader mix of asset types. The Sterling & Law risk profile assessment is simply a guide based on information provided. Your financial adviser will explain what your risk benchmark score means in terms of potential gains and losses and help you decide whether to maintain, increase or decrease the risk level in the light of your particular investment goals and your full personal circumstances. Personal Details Full Name Date of Birth

2 Risk profile questionnaire for retirement What is your level of experience and knowledge of different types of investment including the stock market and equity based investments? a: I am very experienced and knowledgeable. b: I am reasonably experienced and knowledgeable. c: I have little experience and knowledge. d: I am completely new to this. Please summarise any investment experience you have in the box below: 1: How long before you expect to start taking retirement income? This time period is very important in the risk assessment process a: I am retiring immediately. b: In less than five years. c: In five to ten years. d: In ten to twenty years. e: In over twenty years. 0 2: Do you have an emergency fund to provide for unexpected expenses, to avoid needing to draw on this investment? a: No. b: Yes but less than three month s income. c: Less than six month s income. d: Around one year s income. e: More than two year s income. 0 3: What is your expectation of your future income up to retirement? a: I expect my income to decrease. b: I expect my income to fluctuate. c: I expect my income to remain level. d: I expect my income to keep pace with inflation. e: I expect my income to outstrip inflation. 0 4: What percentage of your total assets (excluding your home) are you proposing to invest now? a: 75% or more. b: 50% to less than 75%. c: 25% to less than 50%. d: 10% to less than 25%. e: Less than 10%. 0 5: Which statement most closely reflects your current financial situation? a: I have a significant mortgage and a lot of obligations such as loans and credit cards. b: I have a reasonable mortgage and a few other obligations. c: I have a reasonable mortgage but no other debts. d: I am mortgage free but have a few other obligations. e: I am completely debt free. 0

3 6: Which statement best describes your objectives for this investment? a: Stability is more important to me than higher returns. My main concern is the safety of my initial investment. * b: I want to achieve higher returns than cash and could accept small short term losses. c: I want to achieve higher returns than inflation. I understand there may be occasional extended periods where my investments might fall in value. d: I want significant investment growth and fully expect periods where the value of my investments might suffer extended falls. e: I am willing to accept significant risk and potential losses in the pursuit of the best 0 returns I can get. *Discussion Point 7: At the beginning of the year you have 100,000 invested. The chart and options below show the performance of five possible investments. Each bar gives a range of possible values at the end of the same year. Which investment would you prefer? 150, , , , , ,000 90,000 80,000 70,000 60,000 Portfolio A Portfolio B Portfolio C Portfolio D Portfolio E This chart is for illustrative purposes only and does not reflect the performance of a specific index or fund. Minimum Maximum Portfolio A: It could be worth anywhere between 95,000 and 105,000 Portfolio B: It could be worth anywhere between 93,000 and 113,000 Portfolio C: It could be worth anywhere between 85,000 and 125,000 Portfolio D: It could be worth anywhere between 77,000 and 137,000 Portfolio E: It could be worth anywhere between 69,000 and 149, : What level of fall in the value of this portfolio over a one-year period would concern you, bearing in mind that investment in shares requires a long-term view? a: More than 5% b: More than 10% c: More than 15% d: More than 20% e: I am not concerned about falls in value as I expect to recover any falls by the 0 time I need to sell my portfolio 9: Suppose one year ago you invested 100,000 in a portfolio. Today, after markets have fallen sharply, you ve checked its value and find it is now worth 87,000. Would you: a: Panic and ask your adviser to sell, investing the proceeds in Cash? b: Be nervous asking your adviser to sell part of the portfolio, investing the proceeds in a less volatile investment? c: Be patient sitting tight expecting the portfolio to recover? d: Be positive investing more in the same portfolio. e: Be aggressive, investing more in a higher risk investment? 0

4 10: An annuity is a secure, regular income which you receive from an insurance company in exchange for your pension fund when you retire. The insurance company is then responsible for paying you a guaranteed secure income for at least the rest of your life. This is in contrast to other arrangements that may rely on investment performance to provide an ongoing income, but may not guarantee an income for life. Such arrangements carry an additional level of risk that your fund value and therefore your future income could reduce if investments did not perform as well as expected. These other options are generally more flexible than purchasing a guaranteed annuity. They are preferred by those who are put off by the idea of irreversibly exchanging their entire pension fund for an income for life. Considering the above, what is your attitude towards purchasing an annuity to provide your income in retirement?? a: A guaranteed annuity is my preferred option to any other form of pension income b: I would only buy a guaranteed annuity if the terms were attractive compared to other options c: I would only consider an investment based annuity, such as with profit s annuity d: I would not consider an annuity unless forced by circumstances at the time e: I would not consider an annuity under any circumstances 0 11: Which of these statements best describes your other retirement provisions? a: I expect to receive state pension benefits b: In addition to the state pension, I have personal / company pension but together they are unlikely to satisfy my retirement needs c: In addition to the state pension, I have personal / company pension and together they will satisfy my retirement needs d: I have sufficient pension and other savings to provide an income equivalent to two-thirds of my anticipated pre-retirement income e: I have sufficient pension and other savings to provide an income equivalent to two-thirds of my anticipated pre-retirement income and will continue working 0 12: How would your spouse or best friend describe you as a risk taker? a: Extremely cautious b: Cautious c: Willing to take a calculated risk d: Adventurous e: High risk taker 0 *Annuity this is the contract you purchase from an annuity provider using a lump sum of money (e.g. the proceeds from your pension fund) to guarantee you an annual income for life or for a period of time.

5 Please total up the points on the right hand side of the tick boxes and divide the final score by 12 to get your risk profile. Score You are more interested in preserving the value of your investment than receiving a return on your capital. You tend to prefer investments with a low risk of a decline in value. You tend to prefer investments with a lower risk of a decline in value however you do recognise that in order to achieve higher returns and beat inflation, some risks must be incurred. You are willing to place a reasonable emphasis on growth investments and are well aware that these are liable to fluctuate in value. You can tolerate some fluctuations and volatility but not dramatic or frequent changes. You have an above average tolerance to risk and are willing to accept a greater chance of a decline in value for potentially higher returns You are willing and usually keen to accept a greater chance of a decline in initial value for potentially higher returns. Low Low + Low - Medium Low - Medium + Medium Medium + Medium - High Medium - High + High High + Comments and notes I agree with this assessment of my current risk profile based on the information I have supplied above and in relation to the investment concerned. Signature Date Sterling & Law Group Plc. is authorised and regulated by the Financial Conduct Authority. Sterling & Law Group Plc. Registered Office: No.1 Harley Street, London W1G 9QD. Registered in England. Reg N o St. James Office No.1 Harley Street London W1G 9QD Head Office: Facsimile: info@sterlingandlaw.com

6 Your Capacity for Loss (Retirement) The following questions do not impact the results of the attitude to risk questions. Where those questions are designed to determine your attitude, the following are designed to establish what risks you can realistically afford to take. Your answers to the following questions are designed to help you and your Adviser determine what type of investment risk and potentially what type of protection would help you to meet your intended goals. If you are investing to generate your retirement income 1: How long do you intend to hold this investment before you start drawing an income from it? a: Within the first 5 years. b: Between 5 and 10 years. c: Over 10 years. d: I do not have a fixed term. 0 2: How much would your standard of living be affected if the income from this investment were to fall below your expectations? a: It would have a significant impact. I cannot afford for this income to decrease and I would struggle financially. b: It would cause me to re-assess my standard of living and make some cut-backs. c: Not much as I have alternative investments to maintain my lifestyle. 0 3: Your investment may have an element of tax-free cash available. What would your plans be for this? a: I have little or no cash reserves and would need immediate access to my tax free cash to bolster them. b: I have adequate cash reserves but may opt to take my tax free cash. c: I have more than adequate cash reserves. If I opted to take my tax free cash, it would NOT be out of necessity. 0 If you are investing to build your retirement fund 4: How long do you intend to hold this investment before you use it? a: Within the first 5 years. b: Between 5 and 10 years. c: Over 10 years. d: I do not have a fixed term. 0 5: How much would your standard of living be affected if your pension fund were to perform below your expectations? (please circle) a: It would have a significant impact. I cannot afford for this income to decrease and I would struggle financially. b: It would cause me to re-assess my standard of living and make some cut-backs. c: Not much as I have alternative investments to maintain my lifestyle. 0 6: Your investment may have an element of tax-free cash available. What would your plans be for this? (please circle) a: I have little or no cash reserves and would need immediate access to my tax free cash to bolster them. b: I have adequate cash reserves but may opt to take my tax free cash. c: I have more than adequate cash reserves. If I opted to take my tax free cash, it would NOT be out of necessity. 0

7 Scoring Circle the appropriate value for each response and note the total for each question. Please indicate your client s score using the following table and see our definitions below. Please note that the table below is based on either the income questions or the capital questions but not both combined. Score from questionnaire Capacity for loss High Medium 3-10 Low Low capacity of loss The client cannot afford for the investment to not meet their objectives as failure to do so could have significant consequences on their standard of living. This may be further compromised as there is higher possibility that they would need access to the money within their investment time-line. Medium capacity for loss The client may be able to afford slight under-performance of the investment but it would cause them to adapt their standard of living. High capacity for loss The client can afford to take the risks associated with their chosen attitude and could withstand any under-performance. Comments and notes I agree with this assessment of my current capacity for loss based on the information I have supplied above and in relation to the investment concerned. Signature Date