Risk Recipe ® – Understanding your views on risk

Whilst most wealth managers still talk in terms of your ‘Attitude to Risk’, in our view this is inaccurate, it can give false readings, and therefore can be quite misleading.

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Instead we should be talking in terms of your Risk Recipe ®, a personalised and specific ‘tolerance to loss’ process, designed around you.

Our role is to introduce and play through your ‘what if’ scenario play book. To make sure that whatever uncertainty is thrown at us, we can get through it.

But it’s not just about staying on track during a crisis, it’s about the emotional trauma caused by market drops, that can impact everything from our health to our relationships. Money is never just about the money.

Experience has taught us that there is a huge difference in someone’s ‘attitude to risk’ which can be quite bullish, and their ‘tolerance to loss’ which is far more accurate, and usually more cautious.

You might think that the more money someone has, the easier it would be to tolerate loss, but in fact it’s quite the opposite.

Losing 20% of £100,000 is bad enough, but losing 20% of £1 million can be gut wrenching, and losing 20% of £10 million, well let’s not go there !

Of course any loss might be temporary, a blip on the journey, but with all the uncertainty in the world, it’s vital that the correct planning and time is taken to fully assess your ‘Tolerance to Loss’.

It’s not about how much money you want to make, it’s about how much money you are prepared to lose, and how much you get to keep.