Talking about risk is good for business

It is worrying that some advisers seem to be asleep on the job when it comes to proper risk assessments for their clients. The process is simple and vital in shaping retirement and saving.

It is not a pretty sight, my chin scraping the ground, but it is there along with my immense incredulity at the conduct of some of my fellow advisers. In the past few weeks I have come across situations in which I am not sure if the previous adviser was awake when they gave advice. I refer to my hobbyhorse: risk assessment.

My clients are bored with this but if you ask them about risk, they will tell you that I bang on about it all the time and they know where they are invested. Crucially, because of this they understand the chances of decline and the benefits of monitoring.

Keep risk on your radar

The reasons for risk assessment are obvious but to recall two incidents will assist in keeping this on your radar.

Talking about risk is good for business.

One client is so tight that moths come out of the cash machine when he draws out the housekeeping. He is also a dyed-in-the-wool Mr Cautious. I did a long risk assessment and he came out as a growth to speculative.

It was liberating; he now takes more of an interest and uses phrases like ‘profit taking’ after a good run. My trail has gone up as a result and his corporate bond holding has gone down.

A worrying case

The second incident is more recent and extremely worrying. A new client of mine was a 64-year-old gentleman coming to end of his working life. He had been well looked after by an IFA and I wondered why I was invited to meet this client. A friend of his, who was a client of mine, suggested that speaking to me may be useful in planning an annuity or drawdown.

The new client was still fully invested and exposed to the markets and his fund value was lower than it should have been. The retirement date was so close that we had no option but to switch to cash and lock in the poor value. The previous IFA had done well with this client until it reached the point of risk planning. It seemed this had been completely overlooked.

As a result, a complaint is now before the Financial Ombudsman Service. I am confident it will be upheld as this is the third such case I have seen and the other two have won their cases.