What is risk?

climbing

We have realized that our role as a financial advisor is really to manage risk. The first thing we must establish with this responsibility is to define “risk”. Textbooks have told us over the years that you should measure risk in terms of volatility using standard deviations. As a mathematician, this should be easy. Next, we studied investment theory which introduced us into the world of Alpha and Beta. Sure, this makes great insomnia-curing reading but after doing this for many years we had to ask ourselves, “is this what is important to our clients”?

The absolute biggest risk I have seen is our clients’ health. Any financial book I have ever read, fails to address this. However, in my experience of being a financial advisor, it truly is the most common obstacle that gets in the way of people living the life they expected.

We are not health care professionals. Short of asking everybody to eat right and exercise, what can we do to help reduce the risk of our clients not enjoying their retirement. The one thing we can give people is time. By reducing the time people spend on their finances, thinking about their finances, talking about their finances and worrying about their finances, we can turn that into free time for you to enjoy your life.

Secondly, we must refute the adage that states “the person that dies with the most money wins”. They generally lose. It means they were never able to enjoy the fruits of their labour. Our job is to help them maintain a balance. We never want to see anybody run out of money or not achieve their philanthropic goals. On the flipside, we don’t want to see clients leave behind a large estate due to living a retirement based on fear of exhausting their assets.

These are truly the risks we manage. Nothing based on markets. Nothing based on standard deviations. We are here to help our clients avoid wasting their most precious currency (time) and striking the appropriate balance between enjoying their wealth before their beneficiaries enjoy their wealth.

Michael Connon B.Sc, CFP
Senior Financial Planning Advisor, Co-Branch Manager
The McClelland Financial Group of Assante Capital Management Ltd.

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