The 10 tasks of your financial advisor. #3: building your investor profile

This blog is the third in a series that Archer Wealth Management will be publishing during the fall of 2017 with the goal of helping you understand how your financial advisor works with you throughout your life to achieve your personal and financial goals. In this third issue we discuss:

3: Building your investor profile

Your attitude towards risk and your ability to absorb market fluctuations without compromising your financial objectives is the basis for managing your portfolio. The investor profile will serve as a guide and structure for establishing your investment policy.

Questionnaire

The advisor is responsible for asking a series of questions in order to establish your investor profile and to meet the "know your client" requirement. The questionnaire used by your advisor to establish the investor profile will include questions from different angles on the following topics

• Risk tolerance. This is the most important element of an investor's profile. Risk tolerance is unique to each individual and must be respected at all times. It represents an investor's capacity to assume fluctuations in the value of his or her portfolio, and more specifically a downward variation over a given period of time.
• The investment horizon. It determines when investments will be withdrawn and will influence the level of tolerable risk. The longer the time horizon, the more risk the investor can assume, as they have more time to recover from a downturn.
• Age. The third element to consider is age. It is closely related to the investment horizon, because the older you get, the less time you have to recover from a major market decline.
• Investment objective. The fourth element of the investor profile is the investment objective. There are four main types of investment objectives:
  1. Safety of principal
  2. The need for income
  3. Thebalance between income and growth
  4. Growth of capital

• The financial situation. Finally, we need to take into account your financial situation, which we have already analyzed together during the first of the 10 tasks. Have you maximized your RRSP and TFSA contributions? Do you have any non-registered investments? Which investment vehicle was favoured? Do you have any debt? What is your gross annual income? Of course, there may be other things to consider depending on your situation.

Know your customer well

In addition to facilitating the establishment of an investor profile, the questionnaire allows the advisor to learn a little more about his/her client and his/her objectives. This is important because in financial planning and portfolio management we must respect the obligation to "know your client well". This means that there is a minimum amount of information that an advisor must gather before making the first recommendation. Part of this information is found in the answers to the investor profile questionnaire. The better we know the client, the better the recommendations!

Next blog

Having established your personal situation, taken stock of your situation, determined your financial objectives and made your investor profile, the next step is to develop your investment policy. This is the subject of our next blog.

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