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Matching Clients with the Right Investments

As a financial advisors, you’re given an immense amount of trust and value in your ability to identify your client’s long-term goals, find their tolerance for risk, and build a diversified, forward-focused portfolio that’s customized to their needs.

Simply put, matching your clients with the right investments for their portfolios is as sure a way as you can find to create fearless investors within your firm. 

But more than that, aligning the appropriate securities with the right clients can help move them closer to their investment goals. In turn, your clients become more loyal and appreciative, stick with you for the long run, and refer other like-minded investors over to your firm (another bonus: Research shows that those client referrals tend to be the most promising prospects!).

And perhaps most importantly, it’s your fiduciary duty to recommend the right kinds of investments to the clients in your care. Let’s explore how a focus on client risk tolerance and quality, risk-centric proposals can help your firm find growth opportunities.

 

First, Focus on Risk Tolerance

When tasked to find investment opportunities for your client, one of the first factors to consider is the level of risk your client is willing and able to take on (aka, risk tolerance). Their risk tolerance can be used to essentially set the right expectations and provide guidelines you can then use to determine if a certain security may or may not be in the client’s best interest.

For example, those nearing retirement often have a lower tolerance for risk than their younger counterparts. Why? Because their portfolio will have less time to recover in the event of a market downturn before they begin withdrawing from it. 

Related: Client Engagement Tools Every RIA Needs

Why Risk Tolerance Matters

Knowing a client’s risk tolerance not only helps you select appropriate securities, but it also enables you to assess their current asset allocation. You can better determine whether they’re invested in a way that may not suit their needs, goals, and/or tolerance for market fluctuations and make swift adjustments accordingly.

It can also help the client you’re working with to understand how different strategies could affect their finances in the long-term. With risk tolerance in the conversation, your clients are able to take abstract numbers and financial jargon and relate it to their vision of success.

 

What Is a Risk Number®?

A Risk Number essentially quantifies an investor and his or her portfolio risk, as opposed to leaving the determination up to each individual advisor’s qualitative analysis. 

A Risk Number ranges from 1 to 99, and it’s calculated based on downside risk – the greater the potential loss, the higher the number. In addition, the Risk Number gives advisors and investors a common language to use when setting expectations, recognizing risk, and making portfolio selections.

Click here to read the case study, “Family Legacy Financial Doubles Their Business in One Year with the Risk Number®

When advisors are able to explain the importance and relevance of a Risk Number, clients have a better understanding of the relationship between risk and reward – not to mention, they can feel confident that their advisor is acting in their best interests.

 

Connecting Risk Tolerance to Proposals

Another big benefit of operating with an investor-centric and risk-aligned process? Your fiduciary duty can really shine.

Nitrogen’s Proposals solution enables advisors to build multiple portfolio proposals for a client, move them through the process from draft to selection, and archive every recommendation to satisfy compliance standards. 

Better yet, those proposals are able to center around your client’s individual Risk Number, meaning you can more accurately propose the right portfolio with the appropriate amount of risk. The result? Your client feels more empowered to buy into their plan and invest fearlessly. 

Related: Monitor Proposals and Drive Growth with Command Center

By using risk as the guide, you can clearly show clients through the risk-driven proposal process how their previous portfolio was misaligned and what they need to change in order to be invested correctly in regards to their personal risk tolerance moving forward.

Too often, complex industry jargon drives so many clients and prospects away from working with real, trusted financial professionals who act in their best interest. But because Nitrogen’s proposals and Risk Numbers are created using real-world, simple language, you and your client can discuss investment options and next steps with ease. 

Related: Helping Clients Fall in Love with their Risk Assessments

Leverage Risk to Find the Right Investments

Your clients depend on you to guide their portfolios in the right direction – that includes assessing their current asset allocation and making any necessary adjustments. By leveraging innovative industry insights like Nitrogen’s client Risk Numbers and risk-driven proposals, you can better deliver on your fiduciary duty as an advisor.

To learn more about the effectiveness of Nitrogen’s tools and platforms, check out our latest case studies now.


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