This question looks simple but is designed to in 2 structures. First, the client is not constraint in prioritizing the 6 different attributes. He may rate each one as strongly or as weakly as he desires. By not forcing the client to prioritize, we find that it let him focus on each attribute individually. He is not restricted by the impact a choice for one attribute may have on his ability to weight the remaining attributes.
The next component of the structure is the order in which the attributes are listed.
Capital preservation: Client will frequently read this and circle “6”. FP should not be surprise at this.
Growth: Most clients will want to have some growth on their portfolio. As they circle this attribute, they began to know the conflicting goals with the response in Capital preservation. FP will use this opportunity to bring out the discussion on multiple forms of investment risks.
Volatility: Listing volatility allows FP to discuss risk measurement and to distinguish between volatility and capital loss. FP should prepare a list of past volatility of the funds or asset class to show client. Finally, FP should relate the concept of volatility to their investment time horizon, and link the client back to Q7, Q8 and Q10.
Inflation protection: Most clients will circle “5” or “6”. FP would use this opportunity to address the conflict between inflation protection and capital preservation. Most clients will understand that not many investment plans can satisfy the 2 attributes at the same time.
Current Cash Flow: Most clients, when asked, automatically assume that they require cash flow from the investment portfolio. FP can take this opportunity to discuss with the client the NEED for cash flow versus the DESIRE for cash flow. Because any early withdrawal from capital will affect the final goal (or objective) this investment is designed for.
Aggressive growth: This is purposefully included as the last attribute. We started with capital preservation and ended with aggressive growth. Aggressive growth refers to aggressive strategy to trade on the market. Most clients will choose a low number on this. If client chooses a high number, FP has to gauge whether client is suitable for portfolio investment which generally don’t fancy aggressive growth strategy.
The next component of the structure is the order in which the attributes are listed.
Capital preservation: Client will frequently read this and circle “6”. FP should not be surprise at this.
Growth: Most clients will want to have some growth on their portfolio. As they circle this attribute, they began to know the conflicting goals with the response in Capital preservation. FP will use this opportunity to bring out the discussion on multiple forms of investment risks.
Volatility: Listing volatility allows FP to discuss risk measurement and to distinguish between volatility and capital loss. FP should prepare a list of past volatility of the funds or asset class to show client. Finally, FP should relate the concept of volatility to their investment time horizon, and link the client back to Q7, Q8 and Q10.
Inflation protection: Most clients will circle “5” or “6”. FP would use this opportunity to address the conflict between inflation protection and capital preservation. Most clients will understand that not many investment plans can satisfy the 2 attributes at the same time.
Current Cash Flow: Most clients, when asked, automatically assume that they require cash flow from the investment portfolio. FP can take this opportunity to discuss with the client the NEED for cash flow versus the DESIRE for cash flow. Because any early withdrawal from capital will affect the final goal (or objective) this investment is designed for.
Aggressive growth: This is purposefully included as the last attribute. We started with capital preservation and ended with aggressive growth. Aggressive growth refers to aggressive strategy to trade on the market. Most clients will choose a low number on this. If client chooses a high number, FP has to gauge whether client is suitable for portfolio investment which generally don’t fancy aggressive growth strategy.
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