Understanding the Risk Score
When a questionnaire is completed, the risk score appears in the Client container. The questionnaire generates a Risk Tolerance Score and a Risk Capacity Score, and Kwanti uses the lower of the two as the client's final Risk Score. Scores run on a 1 to 100 scale regardless of the point values used when the questionnaire was built. A score of 100 represents maximum tolerance or capacity, with all other scores scaled relative to that maximum.
Key Components
- Risk Tolerance: Measures a client's comfort with volatility in the value of their investments, or how much uncertainty they are willing to endure to reach their financial goals.
- Risk Capacity: Measures a client's financial ability to absorb losses, based on their long-term objectives, time horizon, and immediate financial needs.