Taking financial risks

[The Todal]

If you have a financial adviser, as I do, you will periodically be asked
to complete a questionnaire about your willingness to take financial
risks, which is supposed to help them advise you about whether to
recommend risky investments which could end up losing all your money or
very safe investments which could provide a very low rate of return,
possibly a negligible growth in the sum invested.

I think by pestering you to complete these questionnaires they reduce
the likelihood of you suing them for giving you poor advice.

Does anyone else find these questions difficult or impossible to answer?
For instance:

"Compared to others [which others? my gran? Bill Gates?] how do you rate
your willingness to take financial risks [what's a financial risk exactly?]
Extremely low risk taker.... low risk taker... average risk taker....
high risk taker.... extremely high risk taker"

"How easily do you adapt when things go wrong financially [how wrong, FFS]
Very uneasily... somewhat uneasily.... somewhat easily.... very easily"

and similar questions are asked, page after page, after those.

I'm tempted just to ignore the questionnaire. But what do you do, or
what would you do if confronted with such a questionnaire?

How easily would you "adapt" if you lost all your savings? Maybe suicide
would be one way of adapting that would seem easy?

[Davey]

On Tue, 24 Sep 2024 22:57:28 +0100

Post by The Todal
If you have a financial adviser, as I do, you will periodically be
asked to complete a questionnaire about your willingness to take
financial risks, which is supposed to help them advise you about
whether to recommend risky investments which could end up losing all
your money or very safe investments which could provide a very low
rate of return, possibly a negligible growth in the sum invested.
I think by pestering you to complete these questionnaires they reduce
the likelihood of you suing them for giving you poor advice.
Does anyone else find these questions difficult or impossible to
"Compared to others [which others? my gran? Bill Gates?] how do you
rate your willingness to take financial risks [what's a financial
risk exactly?] Extremely low risk taker.... low risk taker... average
risk taker.... high risk taker.... extremely high risk taker"
"How easily do you adapt when things go wrong financially [how wrong,
FFS] Very uneasily... somewhat uneasily.... somewhat easily.... very
easily"
and similar questions are asked, page after page, after those.
I'm tempted just to ignore the questionnaire. But what do you do, or
what would you do if confronted with such a questionnaire?
How easily would you "adapt" if you lost all your savings? Maybe
suicide would be one way of adapting that would seem easy?

I have never been asked how I would adapt if it all went wrong. Change
your financial advisor, is my advice.

[JNugent]

Post by The Todal
How easily would you "adapt" if you lost all your savings?

Steady on!

Labour will need a whole year to achieve that.

[Jon Ribbens]

Post by The Todal
If you have a financial adviser, as I do, you will periodically be asked
to complete a questionnaire about your willingness to take financial
risks, which is supposed to help them advise you about whether to
recommend risky investments which could end up losing all your money or
very safe investments which could provide a very low rate of return,
possibly a negligible growth in the sum invested.
I think by pestering you to complete these questionnaires they reduce
the likelihood of you suing them for giving you poor advice.
Does anyone else find these questions difficult or impossible to answer?
"Compared to others [which others? my gran? Bill Gates?] how do you rate
your willingness to take financial risks [what's a financial risk exactly?]
Extremely low risk taker.... low risk taker... average risk taker....
high risk taker.... extremely high risk taker"
"How easily do you adapt when things go wrong financially [how wrong, FFS]
Very uneasily... somewhat uneasily.... somewhat easily.... very easily"
and similar questions are asked, page after page, after those.
I'm tempted just to ignore the questionnaire. But what do you do, or
what would you do if confronted with such a questionnaire?

The problem I have is: what do they mean by "risk"? If I have £1,000
in the bank, and sterling becomes devalued and worthless, I still have
£1,000 regardless. Has something bad happened to my savings, or not?
The impression I get is that advisers think not. So investments that
spread your money in a variety of things across the world seem to be
viewed as "high risk" yet to me they feel like "low risk". Similarly,
that "zero risk" FSCS-backed bank account feels "high risk" to me.
So the questions are utterly meaningless.

[Pancho]

Post by Jon Ribbens

Post by The Todal
If you have a financial adviser, as I do, you will periodically be asked
to complete a questionnaire about your willingness to take financial
risks, which is supposed to help them advise you about whether to
recommend risky investments which could end up losing all your money or
very safe investments which could provide a very low rate of return,
possibly a negligible growth in the sum invested.
I think by pestering you to complete these questionnaires they reduce
the likelihood of you suing them for giving you poor advice.
Does anyone else find these questions difficult or impossible to answer?
"Compared to others [which others? my gran? Bill Gates?] how do you rate
your willingness to take financial risks [what's a financial risk exactly?]
Extremely low risk taker.... low risk taker... average risk taker....
high risk taker.... extremely high risk taker"
"How easily do you adapt when things go wrong financially [how wrong, FFS]
Very uneasily... somewhat uneasily.... somewhat easily.... very easily"
and similar questions are asked, page after page, after those.
I'm tempted just to ignore the questionnaire. But what do you do, or
what would you do if confronted with such a questionnaire?

The problem I have is: what do they mean by "risk"?

Risk is a measure of how one asset will vary with respect to other
assets that you may want to exchange it for. In a normal persons case
the assets will be savings vs expected future expenditure.

Vary means mathematical variance (or standard deviation). This is a
measure of how much one quantity changes with respect to another in the
short term, in contrast to drift which means how the values are expected
to change in the long term. The classic examples being a savings account
and a stock portfolio. A savings account will grow approximately with
inflation, the stock portfolio will go up and down on a day to day
basis, but over the long term it will tend to have a better drift
upwards in value.

I dunno if that makes sense to you?

Post by Jon Ribbens
If I have £1,000
in the bank, and sterling becomes devalued and worthless, I still have
£1,000 regardless. Has something bad happened to my savings, or not?
The impression I get is that advisers think not.

This is a discussion of inflation. A savings account should pay interest
to cover inflation. Obviously this isn't perfect. If you really want to
reduce risk you need to hold similar assets to the ones you want to
exchange for in future. For instance if you want to buy a house, the
most correlated asset will be a similar type of house.

Post by Jon Ribbens
So investments that
spread your money in a variety of things across the world seem to be
viewed as "high risk" yet to me they feel like "low risk". Similarly,
that "zero risk" FSCS-backed bank account feels "high risk" to me.
So the questions are utterly meaningless.

This is actually a reasonable observation. Many of the assets you buy
will be imported from around the world. So you are reducing long term
risk, but in the short term FX rates jump around a lot.

So the basic question the advisors are asking is do you care about long
term risk or short term risk.

Your standard personal financial advisor will either be a fuckwit or
someone motivated by the commission he receives from the products he
sells you.

[Jon Ribbens]

Post by Pancho

Post by Jon Ribbens
If I have £1,000
in the bank, and sterling becomes devalued and worthless, I still have
£1,000 regardless. Has something bad happened to my savings, or not?
The impression I get is that advisers think not.

This is a discussion of inflation.

I wasn't thinking of inflation really. When Brexit happened and sterling
dropped significantly immediately, I don't think that's called "inflation",
is it?

Post by Pancho
A savings account should pay interest to cover inflation. Obviously
this isn't perfect. If you really want to reduce risk you need to hold
similar assets to the ones you want to exchange for in future. For
instance if you want to buy a house, the most correlated asset will be
a similar type of house.

You're doomed then, because UK real estate appreciates faster than
anything else, I think. But my point is that if you want to assess
risk in that way then you have to guess not only the currency value
of your investment/savings but what you think the price of the thing
you want to buy is going to be in the future too.

Post by Pancho

Post by Jon Ribbens
So investments that
spread your money in a variety of things across the world seem to be
viewed as "high risk" yet to me they feel like "low risk". Similarly,
that "zero risk" FSCS-backed bank account feels "high risk" to me.
So the questions are utterly meaningless.

This is actually a reasonable observation. Many of the assets you buy
will be imported from around the world. So you are reducing long term
risk, but in the short term FX rates jump around a lot.
So the basic question the advisors are asking is do you care about long
term risk or short term risk.

I don't think they understand either of those terms either. Under the
previous government I considered both the long-term and short-term
risk of a UK bank account to be very high.

[Pancho]

Post by Jon Ribbens

Post by Pancho

Post by Jon Ribbens
If I have £1,000
in the bank, and sterling becomes devalued and worthless, I still have
£1,000 regardless. Has something bad happened to my savings, or not?
The impression I get is that advisers think not.

This is a discussion of inflation.

I wasn't thinking of inflation really. When Brexit happened and sterling
dropped significantly immediately, I don't think that's called "inflation",
is it?

In a world with free trade/efficient markets there shouldn't be
arbitrage opportunities. Ignoring tax, delivery charges, this means if
you buy a washing machine in the UK for 200 GBP, and you can convert 200
GBP to 240 EUR, the washing machine should cost 240 EUR in France.

If the exchange rate GBP/EUR changes to 1 EUR for 1 GBP. The price of
the washing machine still costs ~240 EUR in France, so something has to
give. What will give is that the Washing machine in the UK will become
worth 240 GBP. Which is inflation. Maybe the French price will drop
slightly, but not so much, as the UK is a smaller market.

Markets are not totally efficient, but ultimately that is what will
happen as trade seeks equilibrium.

This means the price of washing machine in France and UK will be tightly
correlated when converted to the same currency, using available FX
conversion rates.

So GBP with Brexit became worth less overnight it just took a while for
the basket of goods used to measure inflation to catch up.

Harold Wilson was bullshiting when he talked about the pound in your pocket.

Post by Jon Ribbens

Post by Pancho
A savings account should pay interest to cover inflation. Obviously
this isn't perfect. If you really want to reduce risk you need to hold
similar assets to the ones you want to exchange for in future. For
instance if you want to buy a house, the most correlated asset will be
a similar type of house.

You're doomed then, because UK real estate appreciates faster than
anything else, I think. But my point is that if you want to assess
risk in that way then you have to guess not only the currency value
of your investment/savings but what you think the price of the thing
you want to buy is going to be in the future too.

Real estate doesn't always appreciate... I have only ever lost money
selling a house, negative equity and whatnot. If houses really were a
sure bet everyone would buy them now, the price would go up until it was
so high that people only expected it to go up as fast as everything
else. If a house was too expensive for little people to buy, financial
people could offer funds that were house price trackers.

A currency is just another asset like gold, oil, washing machines, or
houses. The "value" of an asset is not an absolute thing, what is
important is the conversion rates from one asset to another. So in
reality an investment is guessing future conversion rates.

Most banks are international and so have a choice of which currency to
report in and measure risk in. There is a specific term numéraire.

<https://en.wikipedia.org/wiki/Num%C3%A9raire>

Post by Jon Ribbens

Post by Pancho

Post by Jon Ribbens
So investments that
spread your money in a variety of things across the world seem to be
viewed as "high risk" yet to me they feel like "low risk". Similarly,
that "zero risk" FSCS-backed bank account feels "high risk" to me.
So the questions are utterly meaningless.

This is actually a reasonable observation. Many of the assets you buy
will be imported from around the world. So you are reducing long term
risk, but in the short term FX rates jump around a lot.
So the basic question the advisors are asking is do you care about long
term risk or short term risk.

I don't think they understand either of those terms either. Under the
previous government I considered both the long-term and short-term
risk of a UK bank account to be very high.

To be fair I'm not sure I understand either. I think I have made some
misleading comments in my earlier explanation. At work risk was always a
collective term. We had specific terms for the types of risk we were
discussing. When we discussed the risk of a trade it was a whole set of
different numbers.

It is hard to translate. And I have mangled concepts.

[JNugent]

Post by Jon Ribbens

Post by The Todal
If you have a financial adviser, as I do, you will periodically be asked
to complete a questionnaire about your willingness to take financial
risks, which is supposed to help them advise you about whether to
recommend risky investments which could end up losing all your money or
very safe investments which could provide a very low rate of return,
possibly a negligible growth in the sum invested.
I think by pestering you to complete these questionnaires they reduce
the likelihood of you suing them for giving you poor advice.
Does anyone else find these questions difficult or impossible to answer?
"Compared to others [which others? my gran? Bill Gates?] how do you rate
your willingness to take financial risks [what's a financial risk exactly?]
Extremely low risk taker.... low risk taker... average risk taker....
high risk taker.... extremely high risk taker"
"How easily do you adapt when things go wrong financially [how wrong, FFS]
Very uneasily... somewhat uneasily.... somewhat easily.... very easily"
and similar questions are asked, page after page, after those.
I'm tempted just to ignore the questionnaire. But what do you do, or
what would you do if confronted with such a questionnaire?

The problem I have is: what do they mean by "risk"? If I have £1,000
in the bank, and sterling becomes devalued and worthless, I still have
£1,000 regardless. Has something bad happened to my savings, or not?

Of course.

It's 1974-79 all over again. You have lost the value - strictly, from
what you actually said, all of the value - of your savings.

What is the value - or the worth - of a "worthless" sum of money?

You could only classify that as "something [not] bad" by changing the
plain meaning of words.

Post by Jon Ribbens
The impression I get is that advisers think not.

It is difficult to see why advisors "think not", unless it is a tactic
and they don't really "think not" at all.

Post by Jon Ribbens
So investments that
spread your money in a variety of things across the world seem to be
viewed as "high risk" yet to me they feel like "low risk". Similarly,
that "zero risk" FSCS-backed bank account feels "high risk" to me.
So the questions are utterly meaningless.

Don't give up so easily. Perhaps this time, Labour won't devalue your
savings as badly via their usual inflationary behaviour (but already,
with those pay settlements, it doesn't look good, does it?).

[Pancho]

Post by JNugent
Don't give up so easily. Perhaps this time, Labour won't devalue your
savings as badly via their usual inflationary behaviour (but already,
with those pay settlements, it doesn't look good, does it?).

It would be hard for them to beat the Brexit vote, overnight devaluation
of Stirling. With the obvious pound in your pocket consequences.

[Spike]

Post by Pancho

Post by JNugent
Don't give up so easily. Perhaps this time, Labour won't devalue your
savings as badly via their usual inflationary behaviour (but already,
with those pay settlements, it doesn't look good, does it?).

It would be hard for them to beat the Brexit vote, overnight devaluation
of Stirling. With the obvious pound in your pocket consequences.

That was a sterling effort regarding Sterling, but besides being a city in
Scotland, Stirling refers to a sub-machine gun made in Dagenham:

<https://en.m.wikipedia.org/wiki/Sterling_submachine_gun>

[billy bookcase]

Post by Spike
That was a sterling effort regarding Sterling, but besides being a city in
<https://en.m.wikipedia.org/wiki/Sterling_submachine_gun>

Are you sure about that ?

bb

[Spike]

Post by billy bookcase

Post by Spike
That was a sterling effort regarding Sterling, but besides being a city in
<https://en.m.wikipedia.org/wiki/Sterling_submachine_gun>

Are you sure about that ?
bb

LOL!

[JNugent]

Post by Pancho

Post by JNugent
Don't give up so easily. Perhaps this time, Labour won't devalue your
savings as badly via their usual inflationary behaviour (but already,
with those pay settlements, it doesn't look good, does it?).

It would be hard for them to beat the Brexit vote, overnight devaluation
of Stirling. With the obvious pound in your pocket consequences.

27% per annum?

Really?

But in any case, it was the electorate who opted for non-membership of
the EU. Not a government or even a political party.

[Jeff Layman]

Post by The Todal
If you have a financial adviser, as I do, you will periodically be asked
to complete a questionnaire about your willingness to take financial
risks, which is supposed to help them advise you about whether to
recommend risky investments which could end up losing all your money or
very safe investments which could provide a very low rate of return,
possibly a negligible growth in the sum invested.
I think by pestering you to complete these questionnaires they reduce
the likelihood of you suing them for giving you poor advice.

Probably, but it's also no doubt a SOP box-ticking exercise for them
-"Have you provided the client with their annual risk questionnaire?".

In general, I just complete it identically to the previous year's one,
being careful to note the "trick question" where they've introduced a
negative in the question and the answer has to be changed from "very
much" to "not at all".

Post by The Todal
Does anyone else find these questions difficult or impossible to answer?
"Compared to others [which others? my gran? Bill Gates?] how do you rate
your willingness to take financial risks [what's a financial risk exactly?]
Extremely low risk taker.... low risk taker... average risk taker....
high risk taker.... extremely high risk taker"
"How easily do you adapt when things go wrong financially [how wrong, FFS]
Very uneasily... somewhat uneasily.... somewhat easily.... very easily"
and similar questions are asked, page after page, after those.
I'm tempted just to ignore the questionnaire. But what do you do, or
what would you do if confronted with such a questionnaire?

I've never seen questions of that type, so I'd ignore them. Mind you, if
it's an online questionnaire these often don't allow you to advance to
the next question if the previous one has not been completed. In that
case I'd not do the questionnaire at all and let them come back to me.

As I said, if it's just a box ticking exercise they will examine the
replies in a cursory manner anyway to ensure there aren't any major
changes. They'll probably get back to you if your attitude to risk has
changed.

Post by The Todal
How easily would you "adapt" if you lost all your savings? Maybe suicide
would be one way of adapting that would seem easy?

I sometimes wonder what financial advisers do that I couldn't (is their
acronym particularly fitting?). My FA, the investment platform company
they use, and the funds that company invests in are all, I understand,
owned by the same umbrella company. I've always been somewhat surprised
that the FCA/FSA (why do we need both?) allow this.

[Jeff Layman]

On 25/09/2024 08:45, Jeff Layman wrote:
would be one way of adapting that would seem easy?

Post by Jeff Layman
I sometimes wonder what financial advisers do that I couldn't (is their
acronym particularly fitting?). My FA, the investment platform company
they use, and the funds that company invests in are all, I understand,
owned by the same umbrella company. I've always been somewhat surprised
that the FCA/FSA (why do we need both?) allow this.

Doh! The FSA disappeared in 2013 and was replaced by the FCA...

[Spike]

Post by Jeff Layman

Post by The Todal
If you have a financial adviser, as I do, you will periodically be asked
to complete a questionnaire about your willingness to take financial
risks, which is supposed to help them advise you about whether to
recommend risky investments which could end up losing all your money or
very safe investments which could provide a very low rate of return,
possibly a negligible growth in the sum invested.
I think by pestering you to complete these questionnaires they reduce
the likelihood of you suing them for giving you poor advice.

Probably, but it's also no doubt a SOP box-ticking exercise for them
-"Have you provided the client with their annual risk questionnaire?".
In general, I just complete it identically to the previous year's one,
being careful to note the "trick question" where they've introduced a
negative in the question and the answer has to be changed from "very
much" to "not at all".

One provider that I know makes a potential investor go through the sort of
risk assessment mentioned, to determine which level of risk to apply to an
investment. But moments after putting in the money, you can change your
risk level to anything you want.

It’s a box-ticking, a***e-covering, hand-washing, blame-shifting exercise.

Post by Jeff Layman

Post by The Todal
Does anyone else find these questions difficult or impossible to answer?
"Compared to others [which others? my gran? Bill Gates?] how do you rate
your willingness to take financial risks [what's a financial risk exactly?]
Extremely low risk taker.... low risk taker... average risk taker....
high risk taker.... extremely high risk taker"
"How easily do you adapt when things go wrong financially [how wrong, FFS]
Very uneasily... somewhat uneasily.... somewhat easily.... very easily"
and similar questions are asked, page after page, after those.
I'm tempted just to ignore the questionnaire. But what do you do, or
what would you do if confronted with such a questionnaire?

I've never seen questions of that type, so I'd ignore them. Mind you, if
it's an online questionnaire these often don't allow you to advance to
the next question if the previous one has not been completed. In that
case I'd not do the questionnaire at all and let them come back to me.
As I said, if it's just a box ticking exercise they will examine the
replies in a cursory manner anyway to ensure there aren't any major
changes. They'll probably get back to you if your attitude to risk has
changed.

Post by The Todal
How easily would you "adapt" if you lost all your savings? Maybe suicide
would be one way of adapting that would seem easy?

I sometimes wonder what financial advisers do that I couldn't (is their
acronym particularly fitting?). My FA, the investment platform company
they use, and the funds that company invests in are all, I understand,
owned by the same umbrella company. I've always been somewhat surprised
that the FCA/FSA (why do we need both?) allow this.

The other thing to watch out for is that the Financial Services
Compensation Scheme limits the cover provided to £85000 *per* *banking*
*licence*. It isn’t always clear whose licence any particular financial
organisation is operating under, but it might be worth digging to find out.

I discovered almost by accident that an organisation I was interested in
investing in was operating under the same licence as another apparently
unrelated organisation that I had also put money in to, so some of those
investments would not have been covered by the FSCS had I gone ahead.

[Max Demian]

Post by Spike

Post by Jeff Layman
I sometimes wonder what financial advisers do that I couldn't (is their
acronym particularly fitting?). My FA, the investment platform company
they use, and the funds that company invests in are all, I understand,
owned by the same umbrella company. I've always been somewhat surprised
that the FCA/FSA (why do we need both?) allow this.

The other thing to watch out for is that the Financial Services
Compensation Scheme limits the cover provided to £85000 *per* *banking*
*licence*. It isn’t always clear whose licence any particular financial
organisation is operating under, but it might be worth digging to find out.

How often have people needed to claim money from the FSCS in recent
years? Was it necessary in the case of Northern Rock, for example?

[Spike]

Post by Max Demian

Post by Spike

Post by Jeff Layman
I sometimes wonder what financial advisers do that I couldn't (is their
acronym particularly fitting?). My FA, the investment platform company
they use, and the funds that company invests in are all, I understand,
owned by the same umbrella company. I've always been somewhat surprised
that the FCA/FSA (why do we need both?) allow this.

The other thing to watch out for is that the Financial Services
Compensation Scheme limits the cover provided to £85000 *per* *banking*
*licence*. It isn’t always clear whose licence any particular financial
organisation is operating under, but it might be worth digging to find out.

How often have people needed to claim money from the FSCS in recent
years? Was it necessary in the case of Northern Rock, for example?

“FSCS is free for consumers to use and, since 2001, has helped more than
4.5 million people and paid out more than £26 billion”.

HTH

[GB]

Post by Max Demian

Post by Spike

Post by Jeff Layman
I sometimes wonder what financial advisers do that I couldn't (is their
acronym particularly fitting?). My FA, the investment platform company
they use, and the funds that company invests in are all, I understand,
owned by the same umbrella company. I've always been somewhat surprised
that the FCA/FSA (why do we need both?) allow this.

The other thing to watch out for is that the Financial Services
Compensation Scheme limits the cover provided to £85000 *per* *banking*
*licence*. It isn’t always clear whose licence any particular financial
organisation is operating under, but it might be worth digging to find out.

How often have people needed to claim money from the FSCS in recent
years? Was it necessary in the case of Northern Rock, for example?

No, the government bailed out NR, so it never failed. (I mean it did
fail, spectacularly so, but people still got paid out.) Same with RBS.

The FSCS can really only deal with small institutions going bust. It
raises its money from levies on other institutions, which could
ultimately mean by a levy on savers, and that doesn't really work.

[Theo]

Post by Max Demian

Post by Spike

Post by Jeff Layman
I sometimes wonder what financial advisers do that I couldn't (is their
acronym particularly fitting?). My FA, the investment platform company
they use, and the funds that company invests in are all, I understand,
owned by the same umbrella company. I've always been somewhat surprised
that the FCA/FSA (why do we need both?) allow this.

The other thing to watch out for is that the Financial Services
Compensation Scheme limits the cover provided to £85000 *per* *banking*
*licence*. It isn’t always clear whose licence any particular financial
organisation is operating under, but it might be worth digging to find out.

How often have people needed to claim money from the FSCS in recent
years? Was it necessary in the case of Northern Rock, for example?

https://en.wikipedia.org/wiki/Icesave_dispute

is an example of where the FSCS stepped in (for depositors in Icesave and
Kaupthing). In contrast depositors in Kaupthing Isle of Man weren't
protected (not in the UK, under the weaker IoM compensation scheme) and got
back pennies in the pound after years of legal troubles. The FSCS usually
pays in full after a couple of weeks.

The FSCS also comes into play when individual financial advisors go bust -
eg if they claim to put their clients' money in a nominee account before
investing it but actually don't.

Theo

[billy bookcase]

Post by The Todal
If you have a financial adviser, as I do, you will periodically be
asked to complete a questionnaire

Maybe like a lot of other things it seems, my understanding of what
constitutes a "financial advisor" is decades out of date. But to me at
least, any "financial advisor" should have no more need to subject their
clients to any questionnaires at all, never mind periodic ones, than
should their accountant, solicitor. or doctor.

All such questions should have been discussed and made note of when first
taking a client on. While any subsequent changes can be discussed at
further meetings; which should take on a regular basis; same as with
the accountant or doctor.

It's what used to be called the "personal touch" and is what clients were
supposedly paying for.


bb

[Roger Hayter]

Post by billy bookcase

Post by The Todal
If you have a financial adviser, as I do, you will periodically be
asked to complete a questionnaire

Maybe like a lot of other things it seems, my understanding of what
constitutes a "financial advisor" is decades out of date. But to me at
least, any "financial advisor" should have no more need to subject their
clients to any questionnaires at all, never mind periodic ones, than
should their accountant, solicitor. or doctor.
All such questions should have been discussed and made note of when first
taking a client on. While any subsequent changes can be discussed at
further meetings; which should take on a regular basis; same as with
the accountant or doctor.
It's what used to be called the "personal touch" and is what clients were
supposedly paying for.
bb

But doctors nowadays get written and signed consent forms for often the most
trivial of procedures and write reams of formal notes stating what they have
explained to the patient and that they have acknowledged understanding it.
This is because so many people nowadays are both litigious and dishonest when
they think a judicious lie will see a nice bit of compo coming their way.

[Pancho]

Post by Roger Hayter

Post by billy bookcase

Post by The Todal
If you have a financial adviser, as I do, you will periodically be
asked to complete a questionnaire

Maybe like a lot of other things it seems, my understanding of what
constitutes a "financial advisor" is decades out of date. But to me at
least, any "financial advisor" should have no more need to subject their
clients to any questionnaires at all, never mind periodic ones, than
should their accountant, solicitor. or doctor.
All such questions should have been discussed and made note of when first
taking a client on. While any subsequent changes can be discussed at
further meetings; which should take on a regular basis; same as with
the accountant or doctor.
It's what used to be called the "personal touch" and is what clients were
supposedly paying for.
bb

But doctors nowadays get written and signed consent forms for often the most
trivial of procedures and write reams of formal notes stating what they have
explained to the patient and that they have acknowledged understanding it.
This is because so many people nowadays are both litigious and dishonest when
they think a judicious lie will see a nice bit of compo coming their way.

But finance and medicine are a bit like statistics you can have a
correct answer misapplied to the wrong question.

For instance a friend had a lumpectomy for breast cancer. Without
consulting her, the surgeon made the incision around the outline of the
areola. The resulting scar is next to invisible, absolutely beautiful
job. However she lost most of the sensation in her nipple. She was
fuming mad, as she would have preferred a far more visible scar at the
base of the breast and to have preserved sensation. She characterised it
as a man's choice, for the benefit of men.

The long and short being that it is important to consider what the
client actually wants. That is often hard to for the client to express
that and hence financial consultants, and doctors, should make a lot of
effort to explain the possible consequences of the choices. It is hard
work and boring, but it needs to be done.

[Martin Harran]

Post by Pancho

Post by Roger Hayter

Post by billy bookcase

Post by The Todal
If you have a financial adviser, as I do, you will periodically be
asked to complete a questionnaire

Maybe like a lot of other things it seems, my understanding of what
constitutes a "financial advisor" is decades out of date. But to me at
least, any "financial advisor" should have no more need to subject their
clients to any questionnaires at all, never mind periodic ones, than
should their accountant, solicitor. or doctor.
All such questions should have been discussed and made note of when first
taking a client on. While any subsequent changes can be discussed at
further meetings; which should take on a regular basis; same as with
the accountant or doctor.
It's what used to be called the "personal touch" and is what clients were
supposedly paying for.
bb

But doctors nowadays get written and signed consent forms for often the most
trivial of procedures and write reams of formal notes stating what they have
explained to the patient and that they have acknowledged understanding it.
This is because so many people nowadays are both litigious and dishonest when
they think a judicious lie will see a nice bit of compo coming their way.

But finance and medicine are a bit like statistics you can have a
correct answer misapplied to the wrong question.
For instance a friend had a lumpectomy for breast cancer. Without
consulting her, the surgeon made the incision around the outline of the
areola. The resulting scar is next to invisible, absolutely beautiful
job.

You seem rather familiar with your friend's nipple :)

Post by Pancho
However she lost most of the sensation in her nipple. She was
fuming mad, as she would have preferred a far more visible scar at the
base of the breast and to have preserved sensation. She characterised it
as a man's choice, for the benefit of men.
The long and short being that it is important to consider what the
client actually wants. That is often hard to for the client to express
that and hence financial consultants, and doctors, should make a lot of
effort to explain the possible consequences of the choices. It is hard
work and boring, but it needs to be done.

[GB]

The financial services sector seems to specialise in damn fool questions.

After one of my staff went to work with them, a firm asked me whether he
is "completely honest". Well, I'm sure he's not completely honest, and I
don't think it's possible to be completely honest without alienating the
people around you. So, I refused to answer the question. It didn't stop
him becoming a partner at one of the major national firms, though.

[Pamela]

Post by The Todal
If you have a financial adviser, as I do, you will periodically be
asked to complete a questionnaire about your willingness to take
financial risks, which is supposed to help them advise you about
whether to recommend risky investments which could end up losing all
your money or very safe investments which could provide a very low
rate of return, possibly a negligible growth in the sum invested.
I think by pestering you to complete these questionnaires they reduce
the likelihood of you suing them for giving you poor advice.
Does anyone else find these questions difficult or impossible to
"Compared to others [which others? my gran? Bill Gates?] how do you
rate your willingness to take financial risks [what's a financial risk
exactly?] Extremely low risk taker.... low risk taker... average risk
taker.... high risk taker.... extremely high risk taker"
"How easily do you adapt when things go wrong financially [how wrong,
FFS] Very uneasily... somewhat uneasily.... somewhat easily.... very
easily"
and similar questions are asked, page after page, after those.
I'm tempted just to ignore the questionnaire. But what do you do, or
what would you do if confronted with such a questionnaire?
How easily would you "adapt" if you lost all your savings? Maybe
suicide would be one way of adapting that would seem easy?

Surely asking about the risk you are willing to bear is a good thing?
The FCA recommends advisers ask about this.

https://www.fca.org.uk/publication/other/fs021-knowing-your-customer-
and-assessing-their-needs.pdf

One difficulty in answering the question(s) is you and your adviser may
not share the same assessment of any stated reference point (what is
meant by "medium risk"?). Nor are you provided with illustrative returns
for a given level of risk, to help your decision.

Although the exercise may lack quantifiable parameters, I would persist
in racking my brains to answer these questions as much as possible as it
gives you better leverage if there are shortcoming later because the
advisers have not acted in accordance to your preferences. There would
be no harm in expanding on any answer you give if you wished to
highlight potential ambiguities in understanding.

[Martin Harran]

On Wed, 25 Sep 2024 15:02:34 +0100, Pamela

Post by Pamela

Post by The Todal
If you have a financial adviser, as I do, you will periodically be
asked to complete a questionnaire about your willingness to take
financial risks, which is supposed to help them advise you about
whether to recommend risky investments which could end up losing all
your money or very safe investments which could provide a very low
rate of return, possibly a negligible growth in the sum invested.
I think by pestering you to complete these questionnaires they reduce
the likelihood of you suing them for giving you poor advice.
Does anyone else find these questions difficult or impossible to
"Compared to others [which others? my gran? Bill Gates?] how do you
rate your willingness to take financial risks [what's a financial risk
exactly?] Extremely low risk taker.... low risk taker... average risk
taker.... high risk taker.... extremely high risk taker"
"How easily do you adapt when things go wrong financially [how wrong,
FFS] Very uneasily... somewhat uneasily.... somewhat easily.... very
easily"
and similar questions are asked, page after page, after those.
I'm tempted just to ignore the questionnaire. But what do you do, or
what would you do if confronted with such a questionnaire?
How easily would you "adapt" if you lost all your savings? Maybe
suicide would be one way of adapting that would seem easy?

Surely asking about the risk you are willing to bear is a good thing?
The FCA recommends advisers ask about this.
https://www.fca.org.uk/publication/other/fs021-knowing-your-customer-
and-assessing-their-needs.pdf
One difficulty in answering the question(s) is you and your adviser may
not share the same assessment of any stated reference point (what is
meant by "medium risk"?). Nor are you provided with illustrative returns
for a given level of risk, to help your decision.
Although the exercise may lack quantifiable parameters, I would persist
in racking my brains to answer these questions as much as possible as it
gives you better leverage if there are shortcoming later because the
advisers have not acted in accordance to your preferences. There would
be no harm in expanding on any answer you give if you wished to
highlight potential ambiguities in understanding.

I went through that process with my financial advisor a couple of
years ago when I was deciding how to invest my pension pot. I found
the process extremely useful in encouraging me to think about my
overall financial situation and requirements, the questions were only
difficult to answer in that they thought-provoking rather than an
irritation. I guess it's a good example of YMMV.

[Martin Harran]

On Wed, 25 Sep 2024 18:22:15 +0100, Martin Harran

Post by Martin Harran
On Wed, 25 Sep 2024 15:02:34 +0100, Pamela

Post by Pamela

Post by The Todal
If you have a financial adviser, as I do, you will periodically be
asked to complete a questionnaire about your willingness to take
financial risks, which is supposed to help them advise you about
whether to recommend risky investments which could end up losing all
your money or very safe investments which could provide a very low
rate of return, possibly a negligible growth in the sum invested.
I think by pestering you to complete these questionnaires they reduce
the likelihood of you suing them for giving you poor advice.
Does anyone else find these questions difficult or impossible to
"Compared to others [which others? my gran? Bill Gates?] how do you
rate your willingness to take financial risks [what's a financial risk
exactly?] Extremely low risk taker.... low risk taker... average risk
taker.... high risk taker.... extremely high risk taker"
"How easily do you adapt when things go wrong financially [how wrong,
FFS] Very uneasily... somewhat uneasily.... somewhat easily.... very
easily"
and similar questions are asked, page after page, after those.
I'm tempted just to ignore the questionnaire. But what do you do, or
what would you do if confronted with such a questionnaire?
How easily would you "adapt" if you lost all your savings? Maybe
suicide would be one way of adapting that would seem easy?

Surely asking about the risk you are willing to bear is a good thing?
The FCA recommends advisers ask about this.
https://www.fca.org.uk/publication/other/fs021-knowing-your-customer-
and-assessing-their-needs.pdf
One difficulty in answering the question(s) is you and your adviser may
not share the same assessment of any stated reference point (what is
meant by "medium risk"?). Nor are you provided with illustrative returns
for a given level of risk, to help your decision.
Although the exercise may lack quantifiable parameters, I would persist
in racking my brains to answer these questions as much as possible as it
gives you better leverage if there are shortcoming later because the
advisers have not acted in accordance to your preferences. There would
be no harm in expanding on any answer you give if you wished to
highlight potential ambiguities in understanding.

I went through that process with my financial advisor a couple of
years ago when I was deciding how to invest my pension pot. I found
the process extremely useful in encouraging me to think about my
overall financial situation and requirements, the questions were only
difficult to answer in that they thought-provoking rather than an
irritation. I guess it's a good example of YMMV.

Sorry, that post was meant as a response to Todal, not you.

[The Todal]

Post by Martin Harran
On Wed, 25 Sep 2024 15:02:34 +0100, Pamela

Post by Pamela

Post by The Todal
If you have a financial adviser, as I do, you will periodically be
asked to complete a questionnaire about your willingness to take
financial risks, which is supposed to help them advise you about
whether to recommend risky investments which could end up losing all
your money or very safe investments which could provide a very low
rate of return, possibly a negligible growth in the sum invested.
I think by pestering you to complete these questionnaires they reduce
the likelihood of you suing them for giving you poor advice.
Does anyone else find these questions difficult or impossible to
"Compared to others [which others? my gran? Bill Gates?] how do you
rate your willingness to take financial risks [what's a financial risk
exactly?] Extremely low risk taker.... low risk taker... average risk
taker.... high risk taker.... extremely high risk taker"
"How easily do you adapt when things go wrong financially [how wrong,
FFS] Very uneasily... somewhat uneasily.... somewhat easily.... very
easily"
and similar questions are asked, page after page, after those.
I'm tempted just to ignore the questionnaire. But what do you do, or
what would you do if confronted with such a questionnaire?
How easily would you "adapt" if you lost all your savings? Maybe
suicide would be one way of adapting that would seem easy?

Surely asking about the risk you are willing to bear is a good thing?
The FCA recommends advisers ask about this.
https://www.fca.org.uk/publication/other/fs021-knowing-your-customer-
and-assessing-their-needs.pdf
One difficulty in answering the question(s) is you and your adviser may
not share the same assessment of any stated reference point (what is
meant by "medium risk"?). Nor are you provided with illustrative returns
for a given level of risk, to help your decision.
Although the exercise may lack quantifiable parameters, I would persist
in racking my brains to answer these questions as much as possible as it
gives you better leverage if there are shortcoming later because the
advisers have not acted in accordance to your preferences. There would
be no harm in expanding on any answer you give if you wished to
highlight potential ambiguities in understanding.

I went through that process with my financial advisor a couple of
years ago when I was deciding how to invest my pension pot. I found
the process extremely useful in encouraging me to think about my
overall financial situation and requirements, the questions were only
difficult to answer in that they thought-provoking rather than an
irritation. I guess it's a good example of YMMV.

But doesn't everyone want the same thing, really? If investing your
pension pot (to take your example) you'd want no risk of losing the
whole pot, small risk of the pot losing value over time, maximum likely
increase in funds over time.

How that is achieved would be up to the skill and judgment of the
financial adviser. Would they need you to spell all that out for them?
Or can you think of different parameters that would work better for you
- eg, no possible risk of the pot losing value in exchange for the value
growing only by a very small amount year by year?

[Pancho]

Post by The Todal
But doesn't everyone want the same thing, really? If investing your
pension pot (to take your example) you'd want no risk of losing the
whole pot, small risk of the pot losing value over time, maximum likely
increase in funds over time.
How that is achieved would be up to the skill and judgment of the
financial adviser. Would they need you to spell all that out for them?
Or can you think of different parameters that would work better for you
- eg, no possible risk of the pot losing value in exchange for the value
growing only by a very small amount year by year?

You might have specific goals. Like being able to buy a specific
retirement home, or yacht. If you can't afford them you will only need
much less money. A miss is as good as a mile scenarios.

The canonical example is the investment fund-manager himself. If his
investment fund outperforms the average fund he keeps his job. If he
underperforms the average he loses his job. It doesn't matter to the
fund-manager if his fund underperforms by 1% or loses everything.

Gambling theory tells us that it is not possible on average to beat a
fair market (a fair bet), i.e. guarantee better than average returns.
However, it is possible to trade normally making a better than average
return in return for the risk of losing everything. In everyday terms
you could think of this as not buying house insurance. Most years you
save money, but occasionally...

[AnthonyL]

Post by Pancho

Post by The Todal
But doesn't everyone want the same thing, really? If investing your
pension pot (to take your example) you'd want no risk of losing the
whole pot, small risk of the pot losing value over time, maximum likely
increase in funds over time.
How that is achieved would be up to the skill and judgment of the
financial adviser. Would they need you to spell all that out for them?
Or can you think of different parameters that would work better for you
- eg, no possible risk of the pot losing value in exchange for the value
growing only by a very small amount year by year?

You might have specific goals. Like being able to buy a specific
retirement home, or yacht. If you can't afford them you will only need
much less money. A miss is as good as a mile scenarios.
The canonical example is the investment fund-manager himself. If his
investment fund outperforms the average fund he keeps his job. If he
underperforms the average he loses his job. It doesn't matter to the
fund-manager if his fund underperforms by 1% or loses everything.

Would that be true!!

Post by Pancho
Gambling theory tells us that it is not possible on average to beat a
fair market (a fair bet), i.e. guarantee better than average returns.
However, it is possible to trade normally making a better than average
return in return for the risk of losing everything. In everyday terms
you could think of this as not buying house insurance. Most years you
save money, but occasionally...

I'm currently trying to reassess my investments, mostly funds, which
tend to be very much stocks based. An IFA would say that at my age
they are risky. When I look at "safe funds" they seem safe in that
there might be as much money and a bit over a period of time, but no
guarantee. I'd rather forego the cost of paying an IFA and offset it
against the potential loss of better performing "risky" investments.
Some investments measure their risk as a % against the FTSE 100, where
100% is the same risk, but no clarity on how risky or otherwise the
FTSE 100 is. Risk can be quite difficult to quantify. Clearly some
vehicles are more sensible for say short term (<5 years) goals such as
Gilts.

An IFA I used to have some ~30 years ago, and really respected as he
was most open and helpful, had to give up when the rules meant he
could no longer talk openly to me (and other clients). At that point
I decided to go it alone.

[Pancho]

Post by AnthonyL

Post by Pancho

Post by The Todal
But doesn't everyone want the same thing, really? If investing your
pension pot (to take your example) you'd want no risk of losing the
whole pot, small risk of the pot losing value over time, maximum likely
increase in funds over time.
How that is achieved would be up to the skill and judgment of the
financial adviser. Would they need you to spell all that out for them?
Or can you think of different parameters that would work better for you
- eg, no possible risk of the pot losing value in exchange for the value
growing only by a very small amount year by year?

You might have specific goals. Like being able to buy a specific
retirement home, or yacht. If you can't afford them you will only need
much less money. A miss is as good as a mile scenarios.
The canonical example is the investment fund-manager himself. If his
investment fund outperforms the average fund he keeps his job. If he
underperforms the average he loses his job. It doesn't matter to the
fund-manager if his fund underperforms by 1% or loses everything.

Would that be true!!

Post by Pancho
Gambling theory tells us that it is not possible on average to beat a
fair market (a fair bet), i.e. guarantee better than average returns.
However, it is possible to trade normally making a better than average
return in return for the risk of losing everything. In everyday terms
you could think of this as not buying house insurance. Most years you
save money, but occasionally...

I'm currently trying to reassess my investments, mostly funds, which
tend to be very much stocks based. An IFA would say that at my age
they are risky. When I look at "safe funds" they seem safe in that
there might be as much money and a bit over a period of time, but no
guarantee. I'd rather forego the cost of paying an IFA and offset it
against the potential loss of better performing "risky" investments.
Some investments measure their risk as a % against the FTSE 100, where
100% is the same risk, but no clarity on how risky or otherwise the
FTSE 100 is. Risk can be quite difficult to quantify. Clearly some
vehicles are more sensible for say short term (<5 years) goals such as
Gilts.

There is a confusion of what risk means. The assumption is the the FTSE
is log-normally distributed and you can look at the volatility online,
and the definition of what it means. Often risk means nothing more than
this. The problem is that this is a simplifying assumption, it only
really applies on average days. It doesn't really handle shocks, stock
market crashes.

The company you are using may have a better measure for risk, but
generally they just quote techno bollocks to impress the investors.

The idea that more risky assets are on average better performing is also
questionable. Most of the financial derivative theory uses a risk
neutral assumption. i.e. low risk and high risk assets perform the same,
on average.

In an efficient market the assumption is that the knowledge of all the
clever investors is contained in the current stock, asset, price. This
means the expected future returns of all stocks are the same (expected
by clever investors).

I wouldn't think myself clever enough to out think the market. So I
invest in index trackers. There is very little evidence managed funds
outperform the indices, and they have higher management charges. It's
not just me that says that Warren Buffet says pretty much the same.

Post by AnthonyL
An IFA I used to have some ~30 years ago, and really respected as he
was most open and helpful, had to give up when the rules meant he
could no longer talk openly to me (and other clients). At that point
I decided to go it alone.

[Pamela]

Post by Pancho

Post by AnthonyL

[TRIMMED]
Gambling theory tells us that it is not possible on average to beat
a fair market (a fair bet), i.e. guarantee better than average
returns. However, it is possible to trade normally making a better
than average return in return for the risk of losing everything. In
everyday terms you could think of this as not buying house
insurance. Most years you save money, but occasionally...

I'm currently trying to reassess my investments, mostly funds, which
tend to be very much stocks based. An IFA would say that at my age
they are risky. When I look at "safe funds" they seem safe in that
there might be as much money and a bit over a period of time, but no
guarantee. I'd rather forego the cost of paying an IFA and offset it
against the potential loss of better performing "risky" investments.
Some investments measure their risk as a % against the FTSE 100,
where 100% is the same risk, but no clarity on how risky or otherwise
the FTSE 100 is. Risk can be quite difficult to quantify. Clearly
some vehicles are more sensible for say short term (<5 years) goals
such as Gilts.

There is a confusion of what risk means. The assumption is the the
FTSE is log-normally distributed and you can look at the volatility
online, and the definition of what it means. Often risk means nothing
more than this. The problem is that this is a simplifying assumption,
it only really applies on average days. It doesn't really handle
shocks, stock market crashes.
The company you are using may have a better measure for risk, but
generally they just quote techno bollocks to impress the investors.
The idea that more risky assets are on average better performing is
also questionable. Most of the financial derivative theory uses a risk
neutral assumption. i.e. low risk and high risk assets perform the
same, on average.

Isn't the "risk neutral assumption" something applied to the behaviour
of PARTICIPANTS in a trading market rather than to the behaviour
(performance) of ASSETS?

Post by Pancho
In an efficient market the assumption is that the knowledge of all the
clever investors is contained in the current stock, asset, price. This
means the expected future returns of all stocks are the same (expected
by clever investors).
I wouldn't think myself clever enough to out think the market. So I
invest in index trackers. There is very little evidence managed funds
outperform the indices, and they have higher management charges. It's
not just me that says that Warren Buffet says pretty much the same.

[Pancho]

Post by Pamela
Isn't the "risk neutral assumption" something applied to the behaviour
of PARTICIPANTS in a trading market rather than to the behaviour
(performance) of ASSETS?

Yes, but participant characteristics do determine how much an asset is
worth. An asset is only worth what participants in the market are
willing to pay for it.

The general idea that risky assets expect greater returns is based on
the idea it costs participants something to "deal" with the risk.
However the cost of dealing with risk varies between assets and
participants.

The actual risk neutral assumption is more a point that by combining
multiple high risk assets, one can get a zero (low) risk total portfolio.

On a similar note, credit worthiness is also a participant
characteristic, but the possibility a trading partner will default on
the trade, or operation, of an asset clearly affects the price of that
asset. e.g. a corporate bond.

[Max Demian]

Post by AnthonyL

Post by Pancho

Post by The Todal
But doesn't everyone want the same thing, really? If investing your
pension pot (to take your example) you'd want no risk of losing the
whole pot, small risk of the pot losing value over time, maximum likely
increase in funds over time.
How that is achieved would be up to the skill and judgment of the
financial adviser. Would they need you to spell all that out for them?
Or can you think of different parameters that would work better for you
- eg, no possible risk of the pot losing value in exchange for the value
growing only by a very small amount year by year?

You might have specific goals. Like being able to buy a specific
retirement home, or yacht. If you can't afford them you will only need
much less money. A miss is as good as a mile scenarios.
The canonical example is the investment fund-manager himself. If his
investment fund outperforms the average fund he keeps his job. If he
underperforms the average he loses his job. It doesn't matter to the
fund-manager if his fund underperforms by 1% or loses everything.

Would that be true!!

With a long term investment such as a pension fund or an investment bond
it's not clear that the managers have much incentive to ensure that it
performs well as it's rather complicated to transfer it.

[Theo]

Post by The Todal
But doesn't everyone want the same thing, really? If investing your
pension pot (to take your example) you'd want no risk of losing the
whole pot, small risk of the pot losing value over time, maximum likely
increase in funds over time.

Absolutely not.

Usually what they mean by 'risk' is 'volatility', ie variations in value.

If you are 90, you might not want to invest in something volatile because
you won't have enough time to make back any losses in your remaining
lifetime, and you're more likely to want to spend the money soon. (unless
it's an investment for your heirs)

If you are 20 and saving for a pension, you're fine with huge amounts of
volatility because you have 50 years to make back the money if things go
south, and you have plenty of time in which you can work to regain the
money.

Higher volatility is correlated with higher returns, so if your timeline
allows you to stomach higher volatility then you will (probably) make higher
returns once all the peaks and troughs are averaged out.

Post by The Todal
How that is achieved would be up to the skill and judgment of the
financial adviser. Would they need you to spell all that out for them?
Or can you think of different parameters that would work better for you
- eg, no possible risk of the pot losing value in exchange for the value
growing only by a very small amount year by year?

You need to tell the financial advisor what your goals are. eg if you're
20, are you saving for a house, investing in your pension, getting married
and starting a family soon...? If you're 50, when are you planning on
retiring?

These kind of questionnaires are ways to quantify some of those things, eg
if you're saving for a house, will you be buying in 1/5/10/20 years?

Often investment funds have a 'risk' scale of 1 to 7.
Cash is a 1 (never drops in price, although watch for inflation).
Bonds might be a 3 to 5.
Large company shares are about a 6.
More volatile shares (eg emerging markets) are a 7.

(even more risky things like forex or bitcoins are typically off the scale
because regulated advisors aren't allowed to advise on them)

Theo

[The Todal]

Post by Theo

Post by The Todal
But doesn't everyone want the same thing, really? If investing your
pension pot (to take your example) you'd want no risk of losing the
whole pot, small risk of the pot losing value over time, maximum likely
increase in funds over time.

Absolutely not.
Usually what they mean by 'risk' is 'volatility', ie variations in value.
If you are 90, you might not want to invest in something volatile because
you won't have enough time to make back any losses in your remaining
lifetime, and you're more likely to want to spend the money soon. (unless
it's an investment for your heirs)
If you are 20 and saving for a pension, you're fine with huge amounts of
volatility because you have 50 years to make back the money if things go
south, and you have plenty of time in which you can work to regain the
money.
Higher volatility is correlated with higher returns, so if your timeline
allows you to stomach higher volatility then you will (probably) make higher
returns once all the peaks and troughs are averaged out.

Post by The Todal
How that is achieved would be up to the skill and judgment of the
financial adviser. Would they need you to spell all that out for them?
Or can you think of different parameters that would work better for you
- eg, no possible risk of the pot losing value in exchange for the value
growing only by a very small amount year by year?

You need to tell the financial advisor what your goals are. eg if you're
20, are you saving for a house, investing in your pension, getting married
and starting a family soon...? If you're 50, when are you planning on
retiring?
These kind of questionnaires are ways to quantify some of those things, eg
if you're saving for a house, will you be buying in 1/5/10/20 years?
Often investment funds have a 'risk' scale of 1 to 7.
Cash is a 1 (never drops in price, although watch for inflation).
Bonds might be a 3 to 5.
Large company shares are about a 6.
More volatile shares (eg emerging markets) are a 7.
(even more risky things like forex or bitcoins are typically off the scale
because regulated advisors aren't allowed to advise on them)
Theo

Thanks for those helpful comments.

However, when faced with a questionnaire which essentially asks me how
reckless I am financially, how keen I am to take risks in the hope of
huge gains, I am struck by how useful my answers would be to any of the
innumerable scammers who try to con people out of their savings or their
pensions. And data breaches can occur at any time.

So that's what I have said to the financial adviser - who has said it
doesn't matter a bit, no need to answer the questionnaire, let's instead
have a discussion about rebalancing my investments.

[Norman Wells]

Post by The Todal
However, when faced with a questionnaire which essentially asks me how
reckless I am financially, how keen I am to take risks in the hope of
huge gains, I am struck by how useful my answers would be to any of the
innumerable scammers who try to con people out of their savings or their
pensions. And data breaches can occur at any time.
So that's what I have said to the financial adviser - who has said it
doesn't matter a bit, no need to answer the questionnaire, let's instead
have a discussion about rebalancing my investments.

Leaving it up to him, presumably, to decide for you the level of risk
you're prepared to take. That, after all, is the basis on the 'balance'
will be decided.

On the other hand, do look at your agreement with your financial advisor
and how much you'll be paying in charges for the churn he'll be
recommending and receiving commission from the financial institutions
for any new investment.