The meaningless and blindingly stupid world of investment product ‘risk assessment’ annual questionnaires _ south china morning post


Are you happy about revealing your income and net worth to someone trying to sell you investment products or anything else for that matter? I guess the answer is, of course not.

Yet, because in the dim and distant past I was weak-minded enough to have trusted some of my cash to fund managers I find myself regularly confronted with something called a ‘risk assessment questionnaire’. Peso to us dollar exchange rate today Does that ring a bell?

These companies, the names of which are very familiar, claim to be conducting these annual reviews in order to protect you and ensure that you do not take unwarranted investment risks. Gender theories pdf Moreover at least one of these companies sends it request for information with the threat that if you do not fill out their questionnaire they will neither accept new orders nor allow you to switch your investment portfolio.

This is a pretty pathetic threat because I have little interest in transacting further or any business with companies that make threats. Futures market today However maybe, and it’s a very big maybe, the company is genuinely trying to be helpful.

That may explain why they ask a range of risk tolerance and investment knowledge questions, the problem is they make little sense: for example, you are asked “what potential loss on your original investment is generally acceptable”.

The stupidity here is blindingly obvious because loss toleration is very much a relative matter. Canadian dollar to us exchange rate I will, for example, tolerate quite a high level of loss on what is obviously a high risk investment but equally can see no reason to contemplate a loss on some low yielding and “safe” form of investment.

Another question related to “investment horizon”; the company’s clients are patronisingly informed that the longer the investment horizon, the possibility of loss decreases. Decimal to binary encoder Gosh, who knew?

Again the questionnaire provides a fixed list of answers ranging from “below 1 year” to “over 10 years”. Equity futures meaning My answer would be all of the above because, as in questions of risks, your investment horizon varies with the type of investment, other demands on your funds, changes in the fiscal environment and then there are contingencies for the unexpected and so on.

I have tried to fill in one of these forms by stating that I have no intention of sharing my financial situation with anyone other than the tax authorities and even there some circumspection needs to be exercised. 40 usd to eur As for most of the other questions, well, they are also pretty meaningless.

Making a response on these lines elicited a phone call from some unidentified person saying that I had filled in the form incorrectly and warning me that my errors needed to be rectified forthwith.