AXA Wealth Self Understanding people’s attitude to risk

"For the majority of consumers, investing should be looked at on at least a five year horizon, and naturally longer when retirement planning. Risk profiling tools are an important first step, but above all, seeking financial advice is absolutely key, and even if they then go on to invest direct, the dialogue between client and adviser should continue into the future."

Mike Kellard, Chief Executive Officer, AXA Wealth

Key findings

AXA Wealth Self has identified that most people’s perceived risk and real risk appetite are two different things. Investors should therefore follow a three step process when it comes to considering their risk profile.

1. Before meeting with an adviser, consumers should consider how the concept of taking a risk makes them feel and weigh this up against the sorts of returns they require from investing
2. Professional advice should be taken, where risk profiling questionnaires can be completed as part of the advice process
3. Regular consultations should take place to ensure the necessary changes are made to the portfolio.

The results of the research make for important reading for all financial advisers and their clients; a consumer who better understands their individual attitude to risk can only lead to a better adviser-client relationship.

• Over two thirds (64%) of consumers are ‘disconnected’ (the difference between perceived and actual) from their attitude to risk. This means that only a third of people would be comfortable with the type of returns they would get from their investments
• Over a third of respondents (33%) actually have a stronger appetite for risk than they think, whilst 31% are less risky than they perceive themselves to be, which potentially is the more dangerous side to fall on, especially in the volatile climate we are currently experiencing
• Eight in 10 people who considered themselves to be in the lowest risk category also show a disconnect score of +2, meaning they actually have a significantly greater appetite for risk than they thought

Overall, a quarter of people believed they were in the most cautious category, when actually only one in 20 sits at this extreme end of the scale.

Resolving the ‘disconnect’ between perceived and actual risk may not be achievable, but financial advisers have a key role in ensuring that it does not have an adverse effect on their clients and their portfolios.

To find out your own risk profile and complete the 14 step risk profile questionnaire, please contact us.