How Often Should You Reprofile Your Clients?

Investors’ risk preferences change over the course of their lifetime. From our research, an investor’s Attitude to Risk decreases consistently with age, while their Sensitivity to Loss increases consistently with age.

This makes intuitive sense, as younger investors still have a longer time horizon and are willing to accept more risk in return for potentially higher gains, while older investors want to protect their wealth and divest into safer assets as they reach retirement age.

However, every investor is unique. The above chart merely conveys population-wide trends we’ve observed.

Therefore, as a best practice, we recommend that clients have their risk preferences re-assessed on an annual basis, similar to an annual health checkup with a physician, just to check-in and see if the client’s attitude to investment risk and reward have changed. From our research, we've found that advisers who re-profile their clients annually have a NPS 10 points higher than those who don't. 

This annual datapoint will give you a pulse on how each client’s risk preferences evolve over time, especially in light of major life events specific to each client. For instance, a client’s risk preferences may change after having a child, purchasing a home, receiving a large inheritance, switching careers, or any other major life event. It also gives you insight into life events that a client may not be forthcoming about, such as a family illness or job insecurity.

By having an evolving understanding of your clients’ risk preferences, you can continually personalise the advice you give them as their life circumstances change. The annual check-up is our recommendation, but you know your clients best and it is up to your discretion to decide how often to re-profile their risk preferences. 

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