Many of us use a traditional risk tolerance questionnaire. We use this questionnaire in an effort to protect clients (and our firms) from too much, as well as not enough risk, depending on the situation. But using a simple risk tolerance questionnaire has its challenges.

Not only do many of these questionnaires take an age-based approach to risk capacity (which may not be appropriate), they rarely have the ability to view separate “buckets” of money independently, which is how many clients view their investments. In addition, these questionnaires typically focus exclusively on investments. But, investments are only a piece of the client’s financial situation.

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