How it works
Risk attitude is a complex area, and risk profiling isn't an exact science. But a well-designed risk profiling tool can assist in financial planning.
Chose how to do the questionnaire
You can do the questionnaire online and get the results immediately or download a PDF for your client to fill in.
Provide client information
The client information will help personalise the reports. All reports generated will be saved to your account.
Have your client answer 12 questions
Each question uses a five-point scale ranging from 'strongly agree' to 'strongly disagree'. The questions have been carefully chosen for ease of use.
Get your client results
Based on their answers, your client will be assigned one of five risk profiles, going from 'very low' to 'very high' risk.
Download your report
The report can be downloaded as a PDF and will be saved to your Vanguard account for future reference.
About our methodology
This tool is based on established psychometric principles, representing best practice from the science of measuring an individual’s attitude.
The questions were designed for ease of use by a variety of client types. We have avoided questions that present complex investment scenarios, require mathematical calculations or use concepts such as percentages. We have also avoided vague questions and those that deal with issues that people might not know anything about.
How we score the questionnaire
Each question uses a five-point scale ranging from Strongly agree to Strongly disagree.
The questionnaire includes a blend of ‘normal’ questions, where agreement indicates an inclination to take risk, and ‘reverse’ questions, where agreement indicates aversion to risk.
The scoring algorithm calculates raw scores that range from 0 to 48, given equal value to each question. We then adjust the raw score to reflect the distribution of responses across people who completed the questionnaire in previous studies. The higher the score, the more the person is willing to take risk.
The complexity of ‘risk’
There are three key components of an individual’s true risk profile:
- Psychological ‘willingness’ to take risk, or risk attitude. This is related to psychology.
- Financial ‘ability’ to take risk, or risk capacity
- ‘Need’ to take risk, or the need to accept risk to meet an objective, avoid falling short of a goal or having wealth eroded by inflation.
Our tool measures the first one. Some people find the prospect of investment volatility and the change of losses distressing. Others are more relaxed about those issues.
‘Ability’ and ‘need’ to take risk depend on the circumstances of the individual, their goals and time horizons and should be considered separately.
This tool is designed to support and enhance, not replace, the ‘know your client’ process. It should not be thought of as a substitute for a suitability test or a recommendation to buy or sell any specific investment product.
This tool is for the sole use of financial advisers in starting a discussion with clients.
The information in this tool does not constitute legal, tax or investment advice from The Vanguard Group. You must not, therefore, rely on the content of this tool when making any investment decisions.