What are your feelings around risk and uncertainty?

It is extremely rare for anyone to score this low in the risk tolerance test, but it’s our job to work in the best interests of all kinds of personality types, and this is no exception. People falling into this risk group are extremely risk-averse, have only taken the smallest financial risks and will always choose the most secure option in any given circumstances.  

• They barely adapt if things go wrong financially
• They prioritise job security over a big pay increase or share options
• It is more important that the value of their investments does not fall than for it to retain its purchasing power
• They will not take a risk with their finances if there is any chance they could end up worse off than if they had done nothing

This is a very low risk tolerance score, and reveals a certain level of financial pessimism and perhaps a lack of confidence in their decisions around money. People falling into this risk group are very risk-averse, thinking of risk as ‘danger’ or ‘uncertainty’, and have only taken very small risks in their financial decisions in the past.  

• They adapt with some difficulty if things go wrong financially
• They would probably chose job security with a small pay increase over a bigger pay increase with less security
• They may tolerate a slight fall in the value of their investments but will prioritise retention of value over an increase in purchasing power
• If there was any chance of losing money, they wouldn’t rearrange their finances to get a tax advantage or benefit

This is a lower than average risk tolerance score and shows only a reasonable amount of confidence in financial decisions, and a certain pessimism about results. People falling into this risk group are prepared to take a small level of risk in their financial decisions, seeing risk as ‘uncertainty’, but have not speculated with a large sum of money.  

• If things go wrong financially, they manage to adapt, but not always easily
• Likely to choose greater job security with a small pay increase than a bigger pay increase with less security
• For most, it’s more important that purchasing power is maintained than that the value of their investments does not fall
• As long as there was only a small chance of being in a worse position, most would risk arranging their affairs for tax advantages or benefits

This is a slightly higher than average risk tolerance score, showing some confidence in financial decisions, and an optimism about results. People falling into this group view risk as a kind of ‘uncertainty’. They are prepared to take a medium level of risk in their financial decisions, but have not previously invested a large sum of money in a ‘risky’ investment.  

• Most will adapt in some way if things go wrong financially
• Most would prefer more job security and a salary with a small pay increase, but some would chose a mix of salary and commission.
• They could be comfortable with a fall of 10-20% in the value of their investments, and it is more important that purchasing power is maintained long-term
• Their investment choices in recent years may have shifted towards those with a lower risk

This is a high score on the risk tolerance scale, showing a reasonable confidence in financial decisions, and a greater interest in the possible gains. People in this risk group are open to a medium level of risk, seeing the opportunities in the uncertainties, but have probably not invested a large sum of money just for the thrill.  

• Most will adapt quite easily if things go wrong financially
• They are slightly more likely to choose less job security with a higher pay increase, and most would chose to be paid a mix of salary and commission.
• They place higher importance on their investments maintaining purchasing power than losing value, and most would be comfortable with a 33% fall.
• Most would take a risk in their financial affairs to gain a tax advantage or benefit so long as there was only a small chance they would be worse off.

This is a very high score on the risk tolerance scale, and many people in this group will have previously invested a large sum of money in a ‘risky’ investment. They have a great deal of confidence in their financial decisions, usually taking medium to large risks and often feel very optimistic about the likely outcomes.  

• When things go wrong financially, most will adapt fairly easily
• Most would chose to be paid a mix of salary and commission, and to take a big pay increase with less job security
• It’s much more important to them that investments maintain their purchasing power than lose overall value, and some might even be OK with a 50% fall
• They’re happy to change their financial affairs if there is at least a 50% chance of being better off, and their recent personal investments have shifted towards higher risk

It’s rare to find someone in this highest bracket of the risk tolerance scale, where people are completely open to taking risks in their financial decisions, seeing them as opportunities. Their confidence and optimism towards their investments mean they will routinely invest large sums of money mainly for the thrill of seeing if it will rise or fall in value.  

• They do not have much trouble adapting when things go wrong financially
• Would prefer to be employed mainly on a commission basis with the possibility of a large pay increase rather than job security
• It’s vital that the value of their investments maintains its purchasing power, and their recent investment choices have been towards higher risk
• It would take a fall in value of more than 50% to make most of them feel uncomfortable.