Advisor.ca will be launching a new ETF-focused content initiative this November. As part of that effort, we’ll create and track hypothetical ETF portfolios geared to the needs of a different type of investor each quarter. To ensure what we create is relevant, kindly fill out the below form so we can target our sample portfolios, case studies, and analysis to our readership’s clients.
Please answer the questions as if you were speaking for a client you would like to see profiled.
Why we are asking this
Investment time horizon
The longer money is invested, the less it is impacted by market volatility. The natural ups and downs neutralize themselves over time. A longer time horizon means more risk is possible.
Income requirements/investment time horizon
Building a portfolio to produce investment income lowers the return potential in the long term, because less risk can be assumed in most cases.
The portfolio’s composition will vary depending on its size to account for the impact of transaction costs. For larger portfolios the additional benefit of diversification from increasing the number of positions may outweigh transaction costs.
Approximate net worth
Your client may be able to take on slightly more risk with his/her capital if it represents a relatively small portion of overall net worth.
Approximate annual income
Your client may be able to take on slightly more risk with his/her capital if it represents a relatively small portion of their overall net worth and/or recurring income.
Taking on risk that makes clients uncomfortable is not a smart strategy! Emotions may get in the way which can lead to decisions a client might regret. For example, in a bear market, a client may panic and ask to switch to a less risky investment, locking in losses with less opportunity to participate in a rebound.
Risk (self) assessment
Client self assessment for risk is notoriously unreliable. Nevertheless, for compliance, and taken together with other questions, this assessment helps to frame a risk profile.
RRSPs are tax-deferred accounts. That means any taxes on the growth of the account are put off until withdrawals take place.
Portfolio managers often prefer to place the most heavily taxed assets in an RRSP (like bonds, because the interest income is normally taxed at a higher rate than capital gains outside the plan).
It’s all about saving money and making effective choices.
Personal tax rate
After-tax returns matter and are important, therefore, tax consequences for clients should be an integral part of every decision.
A client’s income tax bracket will be taken into account at various decision levels to make the management of client money more tax efficient.
This is a standard KYC question. More knowledge can mean a larger appetite for risk but must be considered together with other factors.
Another standard KYC question. More experience can mean a larger appetite for risk but must also be considered together with other factors.
A standard KYC question that attempts to establish the objective for the portfolio. Higher growth implies higher risk and vice versa.
A question to assess and validate risk tolerance and investment goals
This is a double check on the risk profiler’s assessment of the portfolio approach chosen for the client.