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Investments and planning for the future – how we understand your needs

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You might feel like you do a lot of talking when you meet with one of our Advisers. Maybe it is a bit of a surprise to be asked about your plans in twenty years, and maybe some of them look a bit like a maths GCSE, but there is method in our madness.

When we make our recommendations to you there are three aspects of your financial position which we really want to understand. They are key to ensuring that our advice really is suitable, and that it fits to your own personal situation.

What is your Attitude to Risk? (ATR)

Your ATR could also be defined as the risk you are willing to take. Some of us are risk- takers, some less so. And your attitude to risk may well change across your life and in response to life events. Often when it comes to investment the potential gain grows in proportion to the potential risk – how do you feel about that? How far would you be willing to go?

What is your Capacity for Loss? (CFL)

Your CFL relates very much to your personal financial position, and helps us understand the level of risk you are able to take. A client with lots of savings, or a low level of financial commitment may be in more of a position to absorb or cope with a financial loss, whereas our client with four kids, two cars, three cats and a snake (and large monthly financial outgoings) might find it more difficult.

What is your Critical Yield? (CY)

Your CY tells us more about the financial targets you have, and how far away from them you are. A client with a high CY will have a higher target for growth, than a client with a low CY. For example, if you come to us at the age of 50 with no pension pot and a plan to retire in ten years, your Critical Yield will be high. You will be looking to build up as big a fund as possible. In the end, because of the relationship between risk and potential growth your CY will help us understand the level of risk you might need to take.

Working with you over time….

Interestingly your Attitude to Risk, your Capacity for Loss and even your Critical Yield may well change significantly over time as we work with you. That’s why we ask our clients to meet with us regularly and to keep us updated with changes in your personal circumstances. While you are young, free and single, you might feel that you have a higher ATR and a higher CFL. But a few years later, with a new baby in the house you might feel differently. And the impact of either of those situations on your personal Critical Yield will very much vary from person to person.

So when you meet with a member of our team to discuss products, recommendations or financial plans they will ask you a lot of questions. Don’t be shy – tell us what you think! There are no right and wrong answers when it comes to taking financial risks, so we’d encourage you to be as honest as possible about how you feel. And if you think about it afterwards and change your mind – talk to us and let us know.

What to know more about your ATR, CFL and CY and how we use them in our recommendations to you? Contact your adviser or call our office to arrange a chat.

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