- The proposed methodology should produce a rating that is reliable and easily understood by non-financial experts.
- It should be simple to calculate and to replicate (to avoid inconsistencies between providers).
- It should have the potential to be applied to a wide range of investment funds and products.
In 2014, the requirement of KIIDs for investment clients is part and parcel of day-to-day business, and has gone some way to provide clarity on the risk factors inherent in individual funds.
Whether or not this supports the position of risk ratings is a matter for debate, but it does not take away the requirement for adult discussion between adviser and client, and detailed risk-profiling prior to making any investment decisions.
Nick McBreen is an IFA of Worldwide Financial Planning
