Financial Planning Information

• Estate Planning
• Retirement
• College
• Taxes
• Medicaid/Medicare
• Identity Theft

Investment

• Risk Tolerance Assessment
• Asset Allocation
• Fee-Based Versus Commissions
• Consumer Resources

Insurance

• Life
• Long Term Care
• Disability
• Home/Auto/Personal Liability Umbrella

Of all the information financial advisors should collect from their clients, probably the most important concerns their tolerance for risk. In fact, it's almost impossible to overstate the importance of accurately assessing a client's propensity for risk.

Our natural preference in life is for certainty. Yet we manage to live with uncertainty every day. For example, even the most sophisticated meteorological forecasts have little accuracy more than a few days ahead. But we can still say with confidence that one location has a better climate than another or that we prefer a particular time of year.

Risk assessment is very critical to the success of your financial plan and should be done by a trained professional, not an amateur. But the problem is many risk assessment tools are exactly that, amateur.

Even though the practice standards published by the Certified Financial Planner Board of Standards, the Association for Investment Management and Research, and the Investment Management Consultants Association all emphasize the importance of assessing a client's risk tolerance, none explain how you should go about making that assessment. A hodgepodge of techniques exist, but most are inadequate, leaving the bulk of the analysis to the advisor. For this reason, risk assessment has been the Achilles heel of the financial planning process.

The challenge for us as advisors is to find a good reliable method for testing clients and evaluating those test results with consistency. The science of psychometrics provides us with the foundation for a testing solution to help us meet that challenge. Psychometrics, a blend of psychology and statistics, is the science of test construction. It is an established discipline that provides standards against which tests can be evaluated.

Our risk assessment solution is provided through our strategic relationship with an Australian company named Fina Metrica. Four years in development, Fina Metrica's Risk Profiling system is, to our knowledge, the world's first web-based system to meet internationally accepted psychometric standards. The Fina Metrica system offers previously unattainable levels of validity, reliability and accuracy in risk tolerance assessment.

At Personal Financial Consulting, Inc., an understanding of a client's risk tolerance is the single most important factor in guiding clients towards a successful investment program. We hope you find this process informative and insightful as you move forward in the realization of your goals.

Please fill out the following questionnaire, when you are finished it will be emailed to us, we will contact you with the results.

1. First Name:
2. Last Name:
3. Address:
4. City:
5. State:
6. Zip Code:
7. Phone Number:
8. Email:
9. I am:	Male Female
10. My year of birth is:
11. My residential postcode is:

12. The highest education level I attained, or the closest equivalent, is:	Did not complete high school Completed high school Trade or diploma qualification University degree or higher qualification

13. Having in mind income from all sources - work, investment, family and government - my personal before-tax income is: Under $30,000 $30,000 - $50,000 $50,000 - $100,000 $100,000 - $200,000 Over $200,000

14. Are you married (or in a de facto relationship)?	Yes No

15. If "Yes", into which income bracket does your combined before-tax income fall?	Under $30,000 $30,000 - $50,000 $50,000 - $100,000 $100,000 - $200,000 Over $200,000

16. How many people in your family, besides yourself, do you fully or partially support financially?

17. Think of your net assets as being what you own, including your family home and other personal-use assets, minus what you owe. Into which bracket does the value of your net assets fall? (If you are married or have a de facto partner, include your share of jointly owned assets): Under $10,000 $10,000 to $25,000 $25,000 to $50,000 $50,000 to $100,000 $100,000 to $150,000 $150,000 to $250,000 $250,000 - $500,000 $500,000 - $1,000,000 $1,000,000 - $2,500,000 Over $2,500,000

Part Two:

1. Compared to others, how do you rate your willingness to take financial risks?	Extremely low risk taker Very low risk taker Low risk taker Average risk taker High risk taker Very high risk taker Extremely high risk taker

2. How easily do you adapt when things go wrong financially?	Very uneasily Somewhat uneasily Somewhat easily Very easily

3. When you think of the word 'risk' in a financial context, which of the following words comes to mind first?	Danger Uncertainty Opportunity Thrill

4. Have you ever invested a large sum in a risky investment mainly for the "thrill" of seeing whether it went up or down in value? No Yes, very rarely Yes, somewhat rarely Yes, somewhat frequently Yes, very frequently

5. If you had to choose between more job security with a small pay rise and less job security with a big pay rise, which would you pick? Definitely more job security with a small pay rise Probably more job security with a small pay rise Not sure Probably less job security with a big pay rise Definitely less job security with a big pay rise

6. When faced with a major financial decision, are you more concerned about the possible losses or the possible gains?	Always the possible losses Usually the possible losses Usually the possible gains Always the possible gains

7. How do you usually feel about your major financial decisions after you make them?	Very pessimistic Somewhat pessimistic Somewhat optimistic Very optimistic

8. Imagine you were in a job where you could choose whether to be paid salary, commission or a mix of both. Which would you pick?	All salary Mainly salary Equal mix of salary and commission Mainly commission All commission

9. What degree of risk have you taken with your financial decisions in the past?	Very small Small Medium Large Very large

10. What degree of risk are you currently prepared to take with your financial decisions?	Very small Small Medium Large Very large

11. Have you ever borrowed money to make an investment (other than for your home)?	Yes No

12. How much confidence do you have in your ability to make good financial decisions?	None A little A reasonable amount A great deal Complete

13. Suppose that 5 years ago you bought stocks in a highly regarded company. That same year the company experienced a severe decline in sales due to poor management. The price of the stocks dropped drastically and you sold at a substantial loss. The company has been restructured under new management, and most experts now expect its stocks to produce better than average returns. Given your bad past experience with this company, would you buy stocks now? Definitely not Probably not Not sure Probably Definitely

14. Investments can go up or down in value, and experts often say you should be prepared to weather a downturn. By how much could the total value of all your investments go down before you would begin to feel uncomfortable? Any fall would make me feel uncomfortable 10% 20% 33% 50% More than 50%

15. Assume that a long-lost relative dies and leaves you a house which is in a poor condition but located in a suburb that's becoming popular. As is, the house would probably sell for $150,000, but if you were to spend about $50,000 on renovations, the selling price would be around $300,000. However, there is some talk of constructing a major highway next to the house, and this would lower its value considerably. Which of the following options would you take? Sell it as is Keep it as is, but rent it out Take out a $50,000 mortgage and do the renovations

16. Most investment portfolios have a spread of investments - some of the investments may have high expected returns but with high risk, some may have medium expected returns and medium risk, and some may be low-risk/low-return. (For example, stocks and property would be high-risk/high-return whereas cash and certificates of deposit would be low-risk/low-return.) Which spread of investments do you find most appealing? Would you prefer all low-risk/low-return, all high-risk/high return, or somewhere in between? Spread of Investments in Portfolio: High Risk/Return Medium Risk/Return Low Risk/Return Portfolio 1 0% 0% 100% Portfolio 2 0% 30% 70% Portfolio 3 10% 40% 50% Portfolio 4 30% 40% 30% Portfolio 5 50% 40% 10% Portfolio 6 70% 30% 0% Portfolio 7 100% 0% 0%

17. You are considering placing one-quarter of your investment funds into a single investment. This investment is expected to earn about twice the certificates of deposit rate. However, unlike a certificates of deposit, this investment is not protected against loss of the money invested. How low would the chance of a loss have to be for you to make the investment?: Zero, i.e. no chance of any loss Very low chance of loss Moderately low chance of loss 50% chance of loss

18. With some types of investments, such as cash and certificates of deposit, the money value of the investment is fixed. However inflation will cause the purchasing power of this money value to decrease. With other types of investments, such as stocks and property, the money value is not fixed. It will vary. In the short term it may even fall below the purchase price. However over the long term, the money value of the stocks and property should certainly increase by more than the rate of inflation. With this in mind, which is more important to you - that the money value of your investments does not fall or that it retains its purchasing power? Much more important that the money value does not fall Somewhat more important that the money value does not fall Somewhat more important that the money value retains its purchasing power Much more important that the money value retains its purchasing power

19. In recent years, how have your personal investments changed?	Always toward lower risk Mostly toward lower risk No changes or changes with no clear direction Mostly toward higher risk Always toward higher risk

20. When making an investment, return and risk usually go hand-in-hand. Investments which produce above-average returns are usually above-average risk. With this in mind, how much of the funds you have available to invest would you be willing to place in investments where both returns and risks are expected to be above average? None 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

21. Think of the average rate of return you would expect to earn on an investment portfolio over the next ten years. How does this compare with what you think you would earn if you invested the money in certificates of deposit? About the same rate as from certificates of deposit About one and a half times the rate from certificates of deposit About twice the rate from certificates of deposit About two and a half times the rate from certificates of deposit About three times the rate from certificates of deposit More than three times the rate from certificates of deposit

22. People often arrange their financial affairs to qualify for a government benefit or obtain a tax advantage. However a change in legislation can leave them worse off than if they'd done nothing.With this in mind, would you take a risk in arranging your affairs to qualify for a government benefit or obtain a tax advantage? I would not take a risk if there was any chance I could finish up worse off I would take a risk if there was only a small chance I could finish up worse off I would take a risk as long as there was more than a 50% chance that I would finish up better off

23. Imagine that you are borrowing a large sum of money at some time in the future. It's not clear which way interest rates are going to move - they might go up, they might go down, no one seems to know. You could take a variable interest rate that will rise and fall as the market rate changes. Or you could take a fixed interest rate which is 1% more than the current variable rate but which won't change as the market rate changes. Or you could take a mix of both. How would you prefer your loan to be made up? 100% variable 75% variable, 25% fixed 50% variable, 50% fixed 25% variable, 75% fixed 100% fixed

24. Insurance can cover a wide variety of life's major risks - theft, fire, accident, illness, death etc. How much coverage do you have? Very little Some Considerable Complete

25. This questionnaire is scored on a scale of 0 to 100. When the scores are graphed they follow the familiar bell-curve of the Normal distribution shown below. The average score is 50. Two-thirds of all scores are within 10 points of the average. Only 1 in 1000 is less than 20 or more than 80. What do you think your score will be?

	You can review your answers by scrolling through the questionnaire. Now is the best time to correct any mistakes or omissions.