Strategy Risk Tolerance Index™

The Strategy Risk Tolerance Index™ is a tool that you can use in your initial discovery engagement to measure how much risk a client will cope with in order to accomplish their goals. This next video will take you through this tool and how you can use it with your clients.

I want to talk to you about risk tolerance. Not what you might be thinking in the form of investment risk tolerance that many of you are having these conversations with clients today, but what we're talking about is strategy risk tolerance. It's more looking at the global picture in how do your clients or prospective clients actually feel about taking on this type of risk.

Just like we talked about in the Complexity Threshold Index™, as it relates to strategy risk, we also have 10 categories that we're measuring, and you can see that here on this slide. But what's important about this is, it works just the same on a scale of one to five. So if somebody has a one in one of the categories, that would mean they have no tolerance, basically a zero tolerance for this type of risk or being in something risky like this. At the same time, on the far side of that on five, it means they have a very high tolerance.

As you can see, having this conversation, if you were dealing with a couple and having a husband and wife in a traditional marriage, filling that out, what you'd find is, you'd see a lot of differences. It'd really helped you to understand how the different people think and feel the things that actually feel risky and are causing stress as it relates to that risk to one person, but maybe not the other.

And so when you look at this, the categories as you see here on that list are, we start off with things about lack of historical performance. That might be important to some people, not such a big deal to others. But then we go all the way down the bottom list. You look at things like civil litigation. There's things that as a result of the type of planning and the things that you do for clients and how you advise them where they could end up in situations that might cause more harm, put them in the public eye or things of that nature.

Something else that we look at and measuring this is, how do they actually feel about the potential of being audited? Now, things that you're doing and things that you're advising and suggesting that these clients do or helping them actually do and pursue are maybe not things that are going to cause these types of situations for clients. But what we're really looking at this is, is what about the whole landscape of all the other professionals. Is their tax partner taking too much risk in their tax planning and the things that they're doing that could actually result in them getting audited? Does the accountant know how they actually feel about taking that type of risk from a strategy standpoint to, again, minimize taxes? That'd be a simple example. Same thing around the estate planning side. How do they feel about that, making a revocable decision? Is that something that actually is too risky for you and something you don't like to do because of the nature of it? But we also talk about as you can see there on the list things like liquidity risk.

The most important thing I can say about this conversation, it's about understanding how your clients feel, how they think, having conversations with them that nobody's ever had with them before, and getting a level of clarity that you can share with the other advisors that are surrounding them and trying to help them pursue what it is that matters to them.

So the strategy risk tolerance is a very different tool than what you think about, as you can see in the realm of investment risk, but looking at them from a global stage around how they feel about risk altogether. When you use this with clients, when you use this with couples, when you use this with business partners, you are going to find differences as you have more and more people filling this out between those individuals, being able to guide and facilitate and make sure that the recommendations and things that are going to be implemented are going to be in alignment with the risks that they're willing to take and they're comfortable with is sure going to make that relationship much better and the world better globally for them.

So I really hope you see the advantages of being able to bring this conversation and this tool to these client relationships and sharing it with the other professionals that you work with to see how they could get a better and deeper understanding of the clients that they're working with. Hopefully that creates some opportunities for you as well. Thank you.

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Strategy Risk Tolerance Index™

Strategy Risk Tolerance Index