Journal of Financial Planning: May 2002
Assessing client risk tolerance is one of the most important, yet most nebulous, activities for financial planners.
Selecting appropriate insurance coverages and determining investment suitability rely heavily on the planner’s ability
to assess risk tolerance, yet no definitive standard for evaluating risk tolerance has emerged.
After many years of observing financial planning clients, I have determined that there are three types of clients for
whom risk tolerance assessment is particularly difficult. The first type consists of clients who have the willingness to
incur risk, but don’t have the financial ability. The second type consists of clients who have the financial ability to incur
risk but don’t have the willingness. The third type consists of all other clients.