How often should the Risk Tolerance assessment be completed?

Risk Tolerance is a psychological trait and is relatively stable over time. It is largely independent of wealth, income, and financial objectives although it does tend to decrease slightly with age, though rarely to a large extent.

Risk Tolerance can change after major life events like marriage, or having children, or experiencing death or divorce, so it’s important to assess it regularly.

Whilst there is no clear guidance about how frequently to test risk tolerance, firms are increasingly moving towards an annual assessment as part of an annual suitability review.

At this time it is also vital to update the more dynamic aspects of a risk profile i.e. the components of the Risk Capacity calculation like assets, income, and future spending, which determine the investors' financial ability to take risk.