Risk is fear of loss but that fear is not the same for everyone. This makes risk a subjective concept. What is perceived as high risk and uncomfortable by one person may be perceived as low risk and feel very comfortable to another.
When financial advisers offer advice or recommend a financial product, they must do so in written statement of advice, but not before they take into account the client’s risk profile.
Product and service providers in other industries could well take a leaf out of this book. All vendors should show a deeper interest in what a customer is likely to be comfortable with and what is likely to keep them awake at night.
Risk analysis is one very useful tool I have taken from my financial planning tool kit and applied to my business coaching services, and with great results.
It takes a little more time and effort but it basically involves understanding a customer’s perception of risk, identify the most serious risks and introducing information or strategies that helps overcome the risks, and enables the customer to confidently move forward.
Until next time