The Investment > Risk analysis within each client plan provides you with powerful tools to examine the risk of a client's assets, assign clients risk questionnaires to complete, and help clients better visualize and understand their own tolerance for risk.
Key Takeaways:
Compare a client's Household Risk to the risk of the Current Portfolio in the Investment > Risk > Summary tab.
Visualize the potential upside and downside of the current and target portfolios in the Investment > Risk > Analysis tab.
Set a Household Risk Score and assign clients questionnaires in the Investment > Risk > Score & Assessments tab.
View the risk scores for individual assets in the Investment > Risk > Details tab.
Risk is available on both the Premium and Platinum subscription tiers. If you are interested in upgrading your account, please reach out to sales@rightcapital.com.
For premium and platinum subscribers, the client-specific Risk analysis can be found in the Investment module within each of your client plans. This is where you can assign that client a questionnaire to complete, set the personalized risk score for that household, and analyze the risk of their current portfolio:
A Risk module can also be found in the top menu bar of your Advisor Portal. This is where you can view a summary of your clients' risk metrics, create risk tolerance questionnaires, and customize your risk categories:
Looking for the Advisor Portal > Risk module?
This article will provide an overview of the Investment > Risk tab in the Client Plan. For more information on the Risk Module in the Advisor Portal, click here.
The Investment > Risk > Summary tab provides several key comparison visuals, all of which highlight the Household Risk Score.
Household Risk: The risk score that is manually set for a given client plan within the Score & Assessments tab. This score is meant to represent that client's tolerance for risk on a scale from 1 to 100.
There are 3 charts available in this tab: the Risk Summary, the Risk Comparison, and the Household Risk Classification. These can be toggled between by clicking the downward-facing arrow next to the chart name.
This chart shows the Household Risk score, in relation to the Current Portfolio risk score and a chosen Target Portfolio risk score:
Current Portfolio Risk: The risk score for that client's current portfolio. Current portfolio risk scores range from 1 to 100, and are calculated based on the standard deviation of that client's investment portfolio.
Target Portfolio Risk: The risk score for your chosen target portfolio, selected via the dropdown menu to the upper right of the chart. Target portfolio risk scores range from 1 to 100, and are calculated based on the standard deviation of that specific model portfolio.
Customizing Current Portfolio Risk
By default, the current portfolio risk score is based on all of the client's non-annuity invested assets. You can customize which assets factor into their current portfolio risk score by opening the Action Items, and then clicking Edit.
This chart shows the Household Risk score, in relation to the Current Portfolio risk score, a chosen Target Portfolio risk score, and the risk scores of three specific asset classes: money market, corporate bonds, and large growth:
Just like portfolios, the risk scores for these asset classes are calculated based on the standard deviation for each asset class.
Note on Standard Deviation:
If you have Custom Asset Classes enabled and have made adjustments to the standard deviation of these asset classes, your risk scores will be different than those shown above. Risk scores will also vary slightly depending on your selected Model Type in the Assumptions > Misc tab of your Advisor Portal.
This chart shows the Household Risk score, in relation to your advisor-specific Risk Tolerance Categories:
Risk tolerance categories are enabled and customized in the Risk > Categories tab of the Advisor Portal. If risk categories are disabled, this chart will be hidden within the client plan and will not be visible as an option.
Curious about Risk Categories?
Risk Categories are entirely optional, but provide advisors with the opportunity to align RightCapital's risk scoring system with your unique perspective on risk. To read more about risk categories, click here.
The Investment > Risk > Analysis tab of each client plan displays the potential annual range of returns for the client's current portfolio, your selected target portfolio, and three asset classes (money market, corporate bonds, and large growth):
The upside and downside percentages are based on a 95% confidence interval, and are calculated using the total return and standard deviation of each asset class and portfolio.
Hover your mouse over the chart to see the upside and downside estimates for each asset class and portfolio.
Choose the target portfolio in the Investment > Risk > Summary tab.
Customize which assets are included in the Current Portfolio in the Action Items > Edit drawer.
This is where you can manually set the Household Risk Score for that client. This score is meant to represent that client's tolerance for risk on a scale from 1 to 100.
To set the household risk score, click the blue 'Set Risk Score' button on the right side of the page:
The risk score can be selected either by using the slider, or by manually typing a number into the text box. All model portfolios within +-10 points of your chosen risk score will be displayed beneath the slider.
Note about Risk Classification
If Risk Categories are enabled, the client's risk classification will also be displayed beneath the slider.
This is where you can assign client's risk questionnaires, and view the progress and results of questionnaires that have already been assigned.
To assign a new questionnaire, click the blue 'Add Assessment' button on the right side of the page:
Every RightCapital account will already have a 'Default Risk Assessment' questionnaire that is available for use. Custom questionnaires can be added in the Risk > Questionnaires tab of the Advisor Portal.
After selecting the questionnaire and the client, click the blue 'Save' button in the lower right of the drawer to finish assigning the questionnaire to that client. If the client has been invited to have access to their plan, they will be asked to complete this questionnaire via a notification screen the next time they sign in:
Alternatively, click the 'Start' button instead to begin the questionnaire right away. This option can be utilized if the client is present with you in person (or virtually, via screen share):
Incomplete questionnaires can be saved and resumed at any time within the Risk Assessment section of the Score & Assessment tab:
Curious about Risk Questionnaires?
Feel free to take a look at our other resources, which provide deeper dives on:
The Investment > Risk > Details tab will display key information for individual assets that make up that client's investment portfolio:
From left to right you will see the account name, owner, and tax category, followed by:
Allocation: The Equity / Fixed Income split for that account, based on the asset allocation entered in the Profile > Net Worth section.
Standard Deviation: The standard deviation for that account, based on the asset allocation entered in the Profile > Net Worth section.
Risk Score: The risk score for that account. Risk scores range from 1 to 100, and are calculated based on the standard deviation of that asset.
The Details tab will display all of the client's assets that are included in their current portfolio risk score. You can customize which assets factor into their current portfolio risk score via the Action Items > Edit drawer.
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