Are your risk tolerance and risk capacity aligned?

By: Scott Van Den Berg, CFP®, ChFC®, CEPA®, AIF®, CRPS®, CMFC®,  AWMA®

Are your risk tolerance and risk capacity aligned?

One of the most important attributes of the wealth management process is to manage risk. After 32 years of working with clients, I have seen many that profess to have a high tolerance for risk, yet their financial situation suggests they don’t have the capacity to take such risks (i.e., if a loss should occur, it would take too heavy a toll on their financial situation).

Alternatively, other clients have expressed a lower tolerance for risk. Yet given their financial assets, investment time horizon, and objectives, they have a greater risk capacity. This means at the very least, they can take more risk with a portion of their household net worth. We believe finding the right balance between risk tolerance and risk capacity is of great importance and can be addressed in the wealth planning process.

As Certified Financial Planner (CFP®), Chartered Financial Consultant (ChFC®), Certified Exit Planning Advisor (CEPA®), and Accredited Investment Fiduciary (AIF®) with over three decades of experience, I can help you create a plan that aligns your unique needs and goals. Please contact me to learn more. (512) 692-7313