Ability and willingness to take risk
Question 1.
If a client’s willingness to take risk is significantly higher than his ability to take risk, what should the financial advisor do?
- Change the client’s personality
- Educate the client about risk and attempt to correct any misconception
- Base the client’s risk tolerance on IPS on his ability to take risk
Question 2.
If a client’s ability to take risk is significantly higher than his willingness to take risk, what should the financial advisor do?
- Change the client’s personality
- Educate the client about risk and attempt to correct any misconception
- Base the client’s risk tolerance on IPS on his willingness to take risk
If I remember correctly, the correct answer for question 1 is C and the answer for question 2 is B.
But I thought we should choose the more conservative one between the two (i.e:willingness and the ability to take risk). My question is why C is not the right answer in question 2?