The Path to Developing Your Risk Profile

We believe investing today requires an analytical and risk-management approach to ensure that portfolios weather the volatile seas.

Risk is painful. Risk is personal.

Risk in the investment world can be painful. We should know; we study it, we measure it, and we monitor it every day. Yet, despite our intense focus on risk as investment professionals, we believe each individual should have their own understanding of risk. Just as a physician cannot dictate to a patient an appropriate pain tolerance, we do not assign our clients an appropriate risk tolerance. Like a good clinician, our job is to assess an individual’s desired level of risk and provide them with solutions and recommendations based on their understanding.

Risk is about the past, present and future.

Many investment professionals begin a new client relationship with a questionnaire. The intent is to learn about a client in order to better inform the investment solutions and decisions. However, we find this approach often lacks the desired impact. In reality, these questionnaires are often impersonal and infrequent. Instead, Cape Ann takes an active role in creating an ongoing dialogue with its clients so that our advice is aligned with their evolving needs.

We learn about our clients in a similar manner as we study mutual funds. Meaning, just as we review past performance of a fund, we also review our clients' history. Through a free-flowing and open dialogue, we seek to understand not just what they want to do with their wealth, but deeper questions, such as What does their wealth mean to them? How did they acquire it? How does it enhance their life? What challenges does wealth present? Where you come from often dictates where you’re going and how you want to get there.

To some, our approach is unorthodox. To many of our peers, it’s simply too time consuming for them to consider. Indeed, it’s hard work. It takes tremendous effort, patience and persistence to truly learn our clients' views on risk.

But in the end, this deeper appreciation of their mindset helps us to successfully do our job – design and manage an investment portfolio to help meet their personal objectives in a manner they will be comfortable with.

To learn more about how we can apply risk management principles to your portfolio, please contact us directly.