Where can I find a risk tolerance scale for IPS questions?

In the risk section in an IPS, they always subjectively say either the client has low, moderate, above average, below average, high, etc… risk tolerance.

Where do I find a scale so I know what exactly “low” risk tolerance means or “high” risk tolerance means? Is “low” risk tolerance measured in standard deviations below a certain amount, ex: 5% portfolio standard deviation signifies “low” risk tolerance. Or is “low” risk tolerance measured in terms of what % of portfolio is allocated to equities?

Like how do I know what’s “low” or “high” risk tolerance? And low in terms of what? If a pension plan has “low” risk tolerance, is it “lower” compared to other pension plans or “low” in general.

I know what to look for when reading the situation. Example, if a pension plan has a large plan surplus and the company is in great financial condition, it has a higher ability to take on risk relative to other pension plans. But how does that translate to low, moderate, above average, below average, high, etc… risk tolerance. I don’t know how to translate what I’ve read into a “low, medium, or high” rating. In my opinion, that pension plan has pretty high ability to take on risk (because of plan surplus and company financial condition) but in another person’s opinion, that pension plan may have a low ability to take on risk (just because it’s a pension plan not a foundation). What’s the right answer?

I need a scale to know what those words mean…

There isn’t such a scale.

So what’s the right answer on those questions then? How do I know if a plan’s risk tolerance is low medium or high? I know the characteristics that would increase/decrease risk tolerance but how do I translate that into an overall risk tolerance rating?

Risk tolerance = Max (Ability to take risk and Willingness to take risk) whereas ability is a stronger term. If there are several factors and average outcome is mixed, then individual’s risk tolerance is simply average.

I don’t get that and it’s too late for me to understand. I think I’m just gonna qualify all my answers for risk tolerance by saying stuff like insurance company has high risk tolerance “RELATIVE” to other insurance companies because of…

and hope for the best


Insurance companies do not have high risk tolerance.

Nor do banks.