Do clients really understand their risk tolerance?
"Risk tolerance is an incredibly difficult thing to define, articulate and then understand for any individual," said Kevin M. Reardon, certified financial planner and president of Shakespeare Wealth Management. "Trying to sync a client's understanding with an advisor's understanding is even more difficult."
Reardon's company requires every client to complete an educational workshop that defines risk and how the firm manages it. Clients must also fill out a new risk-tolerance questionnaire every three years.