take the lower one when ability and willingness collide?

CFA Level III
#1

take the lower one when ability and willingness collide?

or ability the hard one, while willingness soft one and could be educated?

#2

My understanding is always lower of the two.

If ability is high, but willingness is low, always have to respect client wishes, but can suggest edu and maybe take up risk over time.

If willingness is high, but ability is low, need to take low risk & explain to them why their ability to take risk is low. Harder here to increase risk over time.

#3

If ability is high but willingness is low - we honor will i.e. low risk tolerance. we dont argue with the client. Investor education is not recommended here.

If ability is low but willingess is high - we honor ability but suggest investor education to reconcile the difference.

#4

Ok - I think we both agree on the big point - less of the two is always reccomended.

rahuls - where in the text / morning exams have you seen to not reccomend education?

#5

In the Ingram case (#1B, 2007 exam), ability > willingness, and the answer favored ability.

#6

Practise - do all available questions & read guidline ans - summary

Always honor the lower of the two - to be on a conservative side…

#7

Actually 1B 2007 is only asking about ability (not willingness)

MIN( ability to take risk, willingness to take risk) = total risk tolerence