Low risk tolerence client with high required rate of return

If the required rate of return for the client is 15% because of living expense. But the client’s ability to take risk is low.

How to deal with this? Risk tolerence overrides return requirement? Thanks.

It’s difficult to change a client’s ability to take risk. Willingness, yes; ability, no.

The sober reality is that the client’s standard of living will have to be reduced.

Thanks, austerity…

Or increase the asset base if that is possible. smiley

I’m not sure how you increase your asset base substantially without increasing your risk tolerance, short of assasinating a loaded aunt who’s named you in her will (which in and of itself requires a high risk tolerance),.

This is an impossible situation to deal with…

If the client’s primary biases are cognitive (rather than emotional), then this is the perfect set-up to educate him/her.


That would help with the client’s willingness to tolerate risk.

Here, the problem is the client’s _ ability _ to tolerate risk.

S2000- When I said that the client would need to be educated, I’m fully aware that his/her *ability* to take risk would not change. Even so, I feel like explaining what is (or in this case, isn’t) possible is still required to make the client more aware.

At the end of the day, I agree with your previous statement that the client will have to reduce his/her standard of living (after receiving an explanation/education/enlightenment from the advisor).

I agree; I simply took issue with your discussion about biases: those generally have to do with willingness to take risk, not ability.

You’re correct: the client needs to know the cold, hard reality: their imagined lifestyle’s about to take a big hit.

I am killing the aunt tonight