Ep 77: How Risky of an Investor Are You? (And How Do You Really Know?)

Ep 77: How Risky of an Investor Are You? (And How Do You Really Know?)

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The Smart Take:

What type of investor are you? Are you conservative, moderate, or aggressive?

These qualitative descriptors are how most think of risk. But what is conservative to you may not be conservative to another.  Rather than using non-measurable descriptions of risk, your customized retirement plan needs to be the foundation to objectively measure risk. Then and only then can the three types of risk — required return, risk capacity, and risk tolerance — be accurately evaluated and aligned.

Why is this important? Take too little risk and it can be a conservative way to go broke. Take too much and you may go broke more quickly. Like the story of the Three Bears you want it just right.

Reminder: Investment returns are not guaranteed. There are costs to invest. Expectations discussed are just estimates and are probability-based (range-based) and are from Blackrock, Research Affiliates, and Vanguard per data available on their websites. 

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The Host:

Kevin Kroskey – About – Contact

Intro:                                     Welcome to Retire Smarter with Kevin Kroskey. Find answers to your toughest questions and get educated about the financial world. It’s time to retire smarter.

Walter Storholt:                Glad you’re with us today. This is Retire Smarter. Walter Storholt with you alongside Kevin Kroskey of True Wealth Design. Kevin is the president and wealth advisor there, serving you all throughout Northeast Ohio, Southwest Florida, and the Greater Pittsburgh area. Go online to truewealthdesign.com and click on the, are we right for you button to schedule a 15-minute call with an experienced advisor on the True Wealth team if you have any questions about what we talk about today. Kevin, good to talk to you once again. How are you?

Kevin Kroskey:                  Walter, it is always my pleasure. Your intro, I got to tell you, I just got pumped up hearing it, so thank you for that.

Walter Storholt:                Oh, good. Next show, remind me, and I’ll go back to my sports broadcasting and PA announcer days. I used to do softball PA announcing in college, and I got really into it. So I’ll pump you up like you’re walking up to the plate.

Kevin Kroskey:                  All right. I’m going to hold you to that.

Walter Storholt:                I’m not in my home studio today solo. I’m in the office, so I don’t want to disturb everybody else in the office, so we’ll wait until I’m back in the home studio where it’s just me, and I don’t have to worry about anybody giving me funny looks.

Kevin Kroskey:                  Very good.

Walter Storholt:                Well, we’ve got a fun show on the way today because we’re going to be talking about one of these financial terms that you often will hear maybe other advisors or financial planners talk about, maybe you’ve seen at least the talk of risk in the news in some way, shape or form. And then the buzzword technically, I guess Kevin, is risk tolerance. But it goes in one ear out the other; not really sure sometimes if that really lands with people or if people really absorb what that means or what the impact of it is on a financial plan. So I know you’re going to break this down in a unique way that is different from the way other people talk about this topic. So take us down the slope of risk tolerance and what that means to you as a planner and what it should mean to us as listeners and folks trying to prepare for our financial future.

Kevin Kroskey:                  Yeah. Great setup, Walter. So for certified financial planners and other professional designations like that, you have to do ongoing education, continuing education, whether you’re an attorney, CPA, CFP, what have you. And I participated in an hour-long course yesterday on risk and these risk tolerance, I’ll call it broadly. And one, it was well done. But two, I was like, well, hey, the old saying, I’ll kill two birds here. Not only will I participate, but I’ll use this as something I can share on the podcast and talk about because it applies to everybody that you work with. You have to understand somebody and gauge their risk preferences if you will, and we’ll explore that and maybe some different views on what that really means. But anytime somebody sits in our conference room, or we have a conversation with them, it’s always something that we ask, or we’ll look into. We’ve talked about it in prior episodes, how to measure it mathematically, and some of those things, but this is a little bit different.

Kevin Kroskey:                  The way that I think about it, we’ve talked about it a lot, but we’ve never dedicated some time specifically to it, so that’s what I thought we would do today. And when we have somebody that’s talking with us, it could be the first time or first few times, we really try to get people out of thinking about it this way, but we’ll just ask them, tell us a little bit about yourself and they’ll often use these qualitative terms when they talk about the type of investor they are. They’ll say, well, I’m a conservative investor, I’m a moderately aggressive investor, I don’t think I’ve ever heard somebody say I’m an aggressive investor in a conversation like that, but nonetheless, these are all qualitative terms. There’s no objective way to measure; well, what conservative is to you, Walter, may be different to what conservative is to me and vice versa. But this is traditionally, I think, how people at least think of it. They use an adjective. They don’t use any sort of defined metric or mathematical way to measure this or anything of the sort.

Kevin Kroskey:                  And that to me, I mean, even though advisers will often use these terms too, I mean, I don’t think it’s very good. Certainly, you don’t want to start here anyway. So that’s what I would call the client view. They’ll just use these broad terms, conservative, moderate, aggressive, something of the sort. And then you probably have gone through these risk tolerance questionnaires, whether that was maybe for a 401(k) plan that you participate in or with a financial advisor that you worked with. In here, it’s a little bit more detailed, not much, but it’ll go into, well, hey, how much time horizon do you have or when are you going to need this money? How long can you remain invested? Do you need income from the investment right now? What other investments do you have? What other availability of assets do you have?

Kevin Kroskey:                  What’s your knowledge or your experience with investing? Are you willing to stay disciplined in down markets? So maybe there’s going to be some questions there about, hey, what would you do if you saw your account go down by 20%? Would you become more conservative? Would you stay invested? Things along those lines. All of those sorts of questions and they could be just a handful, could be maybe 10 to 20, but they’re all assigned some value and scored, and then it comes up with a number, and that number supposedly states what somebodies risk tolerance is. So it’s a little bit better than the client view. It’s still, in my opinion, falls quite short, and I think a lot of this is really done by financial advisors or financial firms as more of a CYA. Walter, do you know the phrase CYA?

Walter Storholt:                Yes. Cover your something.

Kevin Kroskey:                  Cover your something, yeah. Cover your assets or-

Walter Storholt:                Your assets. There you go.

Kevin Kroskey:                  Abridge that third word a bit. But we just had this recently with a client that basically we utilize, and I’m not a big fan of annuities, but they had some annuity money already, and we were able to move them into a lower cost, no commission annuity. And all of these insurance companies are difficult to work with, and they all have these conflicts of interest with the commissions. And if you really want my take on annuities and how they’re misused, just go back in the podcast archives and go into it. But nonetheless, we were in this environment where we had to go through one of these questionnaires, and I’m just reading this thing, and it was a lot of those things, time horizon, need for income, what other assets do you have, so on and so forth. And I mean, it was just BS in my view. I’m like, this just makes no sense. There’s really no value here. This is purely or almost entirely in that CYA category.

Kevin Kroskey:                  And unfortunately, that’s where it’s evolved to, but when you have misaligned incentives, and I think financial advisors generally are good, well-meaning people, but just like any group of people, there’s always going to be some bad actors. And when you have misaligned incentives like high commissions on annuities, things are going to get missold, and then you end up with these sorts of questions to basically CYA and say, well hey, it was suitable for Joe and Jane to go ahead and buy this, that sort of thing. So the client view again is just using those more qualitative terms, whether it’s conservative, moderate, aggressive, things along those lines. Then it may be evolved at some point, probably as a result of some court cases to this more traditional view of a time horizon, do you need income, what other assets do you have available, so on and so forth.

Kevin Kroskey:                  I mean, it never made sense to me, and I never use those questionnaires as long as I’ve been in business. The way that we evolve to and similar coincidentally because I don’t recall this really being in the CFP curriculum, hey, this is the way that you do it. But the gentleman from who I was taking the continuing education class from and I really had parallel views on how to do this. I certainly got some things out of it that was a little bit new, and I’ll talk about that. But basically, it started, I’ll call it our way or the True Wealth way, and certainly, it starts with the financial plan. And most of our clients tend to hire us when they get serious about retirement. They tend to be in their 50s and have a few years left. Certainly, the sooner, the better, but just pragmatically, that’s looking back over the years, and that’s when people tend to hire us.

Kevin Kroskey:                  We construct their financial plan, we really measure their spending, making sure that we’re going through any sort of goals that they have that maybe are different from their current lifestyle, modeling that into their retirement goals, assigning different values for those goals, not just in terms of how much is it going to cost but what does it need, maybe what’s a little bit more of a discretionary want and then things go really well, hey, I wish I could also do this sort of thing, so you’re prioritizing those goals based on those needs, wants and wishes. Thinking through pension, social security, making smart decisions there, looking at your investments and making sure they’re well-aligned back to the financial plan and to support your lifestyle goals and then being tax-smart and overlaying that into the whole plan and just making sure that you’re just paying no more than your fair share and making your money last longer.

Kevin Kroskey:                  So that’s the planning process, but after you have that, part of that investment step is really what we’re going to talk about today is it relates to risk and investments, it’s hey, what kind of return do you really need from your investments to make your financial plan work? We just call that a required return. We can measure that. It’s mathematical; it’s not qualitative. It’s not saying, well, I need a conservative portfolio, or I need an aggressive portfolio to make my plan work. No, we’ll use a number; what kind of net return do we need to make the financial plan work? So we call that required return.

Kevin Kroskey:                  It’s determined by the financial plan that we have to do first. It’s part of that planning process. So after we have that, we go into risk capacity, and again, it’s measuring your financial capacity or your ability to take risks. Again, I can think of this, and we do this in mathematical terms, and the way that I would maybe rephrase it or relate it to somebody’s retirement plan is, how much lifestyle risks do you have or goal risk? Meaning that for some clients, if they don’t take a certain level of risk, if they just kept everything in cash, their financial plan is not going to work because, Walter, what’s cash-paying these days?

Walter Storholt:                Point something.

Kevin Kroskey:                  Point something. Good answer. Yes, very low. So if they need, say, maybe a 3% or 4% net return to make their financial plan work overtime, then cash isn’t going to cut it. On the other hand, if they’ve done really well and lived really below their means, maybe they can keep it in cash, or they can be very aggressive in a diversified fashion. They have a lot of capacity in that second example. But I think of it as, what’s the risk? You’re going to have to make a change to your lifestyle. What’s the risk? You’re not going to be able to meet some of your goals.

Kevin Kroskey:                  And again, using the goals or we have some clients that they just really want to continue with their lifestyle into retirement, others really want to increase it, and now that they have more time, they want to do more and travel more and spend more and have a second home in Florida and help out their grandkids and things along those lines. So it’s really the risk capacity is; what’s the likelihood that you’re going to have to make a change and pull back from your lifestyle? That’s the way I prefer to explain it to clients to rethink this. It’s really measuring your financial capacity to take risks, but plain-spoken, it’s really, what’s the likelihood that you would have to make a change and pull back from your spending and maybe not meet some of those lifestyle goals that you have.

Walter Storholt:                So you’re really trying to take out some of the subjectiveness of the risk conversation and just really view it more objectively. It doesn’t really matter to you if somebody comes in and says, Ooh, I don’t like taking a lot of risks or, oh yeah, let’s be really aggressive just because I like taking risks. You’re like, we’re asking the questions in the wrong order here. It doesn’t really matter how you feel about risk. The plan is going to tell us what we need to do. Then sure, maybe we can have a little conversation about where the emotions play a role, but you’re trying to diminish the role that emotions play here.

Kevin Kroskey:                  You got it right and quite perceptive of you. I mean, it’s really starting out with those objective measurements that we measure from the financial plan. And then, not that it’s unimportant, but then we can go into the qualitative questions about risk, what we would maybe call risk tolerance or your risk attitude. And then there are different ways we can measure that. One is, through conversations, trying to go back on past experience, how did you behave when 2008 happened, and the stock market sold off by 50%? What did you do in March of 2020 when we had the pandemic, and everything was shut down, and the market fell by about a third in three weeks? How did you respond? So we can go back and look to certain extreme events like that and see how somebody responded, and that’s okay.

Kevin Kroskey:                  But the problem with just those conversations it’s, one, the person asking the questions can influence the responses depending on how you ask the question. So you have to really be smart about how you’re asking those questions, and you can be smart but unintentionally influence nonetheless. Maybe things are different for that person, maybe they were working, and they were only in their 40s in 2008 and really didn’t pay much attention to their investments because they knew they were going to be working for another two decades or so but now when COVID happened they’re paying much closer attention, one, because they have more dollars, they’re closer to what they perceive as the retirement finish line, so to say, and it’s just a different situation for them. So it’s dynamic, but the conversational aspect is important, I think, but it’s problematic.

Kevin Kroskey:                  So another way to measure that risk attitude, there are other ways, and I’m not aware of many good ways but the same sort of way that you would measure somebody’s personality and taking a personality profile or think of Myers-Briggs or something along those lines. You can have a psychometric test where you have a valid, reliable test and really a score if you will. You’ve tested the test to make sure it’s really testing what you’re hoping to. And then what studies have shown, there was a company called FinaMetrica out of Australia that was purchased by Morningstar that was really the pioneer in this field in terms of using a psychometric test for risk. And so they have a lot of good data, not just from Australia but from the UK, from the US, and we can use those sorts of tests to go ahead and get more so towards this attitude.

Kevin Kroskey:                  But nonetheless, you still need to start in my view and also, the class that I was in yesterday and in his view as well, with the financial plan, with the mathematical, with the objective, what is somebody’s required return. And that’s a bit of an oversimplification. Returns are not achieved year in year out. The order of returns in retirement matters a great deal. It’s a bit of a simplification just for discussion purposes, but nonetheless, it’s important and then the risk capacity and going through that, and then thirdly, you’re getting into more of the qualitative, more of this attitudinal sort of approach to risk. What are some of the ways that they’ve experienced risk in the past, and maybe even if we can utilize a psychometric test that is valid, that is reliable, to go ahead and objectively measure this and get some value there.

Kevin Kroskey:                  And importantly too, Walter, you think about you and your wife, I think about my wife and me. I mean, both spouses may be different, you may have one spouse that’s really comfortable with risk and the other one that’s not, and you have to reconcile that in some way. But these are the things that we’ll call, again, the True Wealth way, but it’s really starting with those mathematical and the objective emanating from the well-constructed financial plan and then going into more of the qualitative, attitudinal, talking about risk, some of the past experiences and maybe even going into that psychometric testing that I mentioned.

Walter Storholt:                Such a key difference because I think it’s the opposite. In maybe traditional, if we can use that word, financial or retirement planning is to sit down somebody right off the bat and say, okay, here’s this questionnaire or fill this out, and then this starts dictating the plan, and you’re flipping it over completely to approach it from a totally different way.

Kevin Kroskey:                  Or, I think it’s been some time, but whenever our retirement role has gone awry was, well, I mean, you don’t even need a questionnaire, all you have to do is take a 100, subtract your age from it and that’s how much you should have in stocks.

Walter Storholt:                And it’s like that almost seems more objective, right? But then we’re getting a little too simplistic, right?

Kevin Kroskey:                  Yeah. I mean, Uncle Albert said something to the effect of, “Things should be as simple as they can be but not simpler.” I mean, you come up with pretty asinine rules like that that may work for somebody but only by pure coincidence.

Walter Storholt:                That was the retirement rules gone awry series that we had way back at the beginning, Kevin, episodes five through 10 I think was that series. So if anybody wants to go check those out, it was somewhere back in that period of time.

Kevin Kroskey:                  You got it. Just give me a little grace if you listen to the early podcast. I think I’ve improved a lot from just saying, removing the ands or the you knows and things along those lines.

Walter Storholt:                Well, we record now at 7:00 AM, we used to record at 4:30 in the morning, so you got to give me a little break and a little credit that early in the morning.

Kevin Kroskey:                  Thank you, Walter.

Walter Storholt:                By the way, specifically, it was episode six. I just looked it up. So that was the rule of 100 conversation there.

Kevin Kroskey:                  Yeah. And we still hear that all the time from people. It’s just out there, and again, it’s definitely an oversimplification. But I’ll give you two examples of this for clients, and I’ll use the typical Jane and John. So Jane was a widow, is a widow, excuse me, her husband passed a little bit more than a decade ago. He handled the finances. He worked at FirstEnergy, it’s a major utility company here in Ohio, somewhat of ill repute these days with the scandal they’ve been entoiled in, but he worked in the finance department. He handled the personal finances. Jane, after he unexpectedly passed from cancer, was forced to take over all of this, and I’m sure a lot of people can envision someone like Jane that I’m referring to right now, and it’s not an easy transition. I mean, you’re going through a grieving process, and now you have all this additional responsibility on it as well. They didn’t have an advisor, their kids were still fairly young, so they really weren’t there to help that much at the time.

Kevin Kroskey:                  But we started working with her, and I’ve been working with her ever since. But Jane has a lot of risk capacity. Her income from his pension, from FirstEnergy, from her social security benefit is higher than what she spends every month. So it’s pretty simple, hey, I got more income coming in from those two guaranteed sources than what I’m spending, I can meet my bills, I can do the things that I want to do, so on and so forth. But she also has about a million and a half dollars. It’s saved up and invested and saved, and what have you. So if you look at that when your income is more than what you’re spending, and you have a million and a half dollars to build, you have a very low required return, and that’s exactly the case for Jane. So she has a very low required return, and she has a very high-risk capacity. She could afford to take a lot of risks because her income is higher than her spending, and she has a lot of additional savings and investments.

Kevin Kroskey:                  But she has a very low-risk tolerance, or her attitude towards risk it’s more of a fear-based one to a certain degree. Another way to frame that and something I got from the class yesterday was her perception of risk is quite high. So in working with her over the years, we just tried to find solutions that worked for her both from a financial standpoint as well as from her attitudinal or emotional standpoint. And some of this worked out really well, and she’s really happy. I’m really happy that she’s happy and things have worked out as well as they have over time, but with interest rates being as low as they are today, point whatever you’re getting on your cash; as you said, Walter, it’s tough to be a conservative investor, tough to be a fixed income investor, if you will, and really have a decent return.

Kevin Kroskey:                  So balancing what may be financially optimal versus what she is comfortable with, particularly in a world of low-interest rates, is challenging, and it’s challenging for anybody that’s more, quote-unquote, conservative investor. But we’ve done some things over the years that have met her needs, and maybe they aren’t optimal financially. Maybe she could have had higher returns, but for her, for who she is, and for her emotional and attitudinal beliefs, they were more optimal for her. Said another way, we got to be pragmatic here. Even though we need to start with a mathematical and measure it, we can’t just do that in a vacuum, we do have to consider who the people are, and if you have a great plan but you can’t live with it, well, you don’t have a very good plan, and you need to go back to the drawing board.

Walter Storholt:                I think these are great illustrations, Kevin, of the different ways that you can have these risk discussions and probably highlights another point like this, everyone is going to be different based on what their plan dictates and tells you, and then it diverges from there. Just like everything else, all of these inputs that go into the planning process, risk, and that different, what was the word? Risk capacity varies from person to person, and that’s got to be something that you have to be sort of nimble about and adjust and change as each new person walks through the door

Kevin Kroskey:                  It’s a planning ING. It’s an ongoing process for sure. This is something that we do year in and year out for people. We’ve talked about this a lot, but we’ve talked about expected returns. We just did an episode a couple of episodes ago talking about return expectations and how in general, they’re lower, but not only are they lower for stocks, but also they’re lower for bonds. So a lot of things said another way is fairly expensive right now, but there’s still likely some reasonable compensation for taking risks, for prioritizing stock-based investments over more conservative bond-based ones or over cash. So that’s always a moving target, and so when you’re working through that and going through somebody’s financial plan and redoing the required return, re-stress testing their plan, measuring their risk capacity, what’s the likelihood that they may have to change their lifestyle goals, things along those lines.

Kevin Kroskey:                  You’re doing that, but then you’re putting in a framework of really, what are we likely to get compensated for taking risks? So it’s always an evolving and ongoing thing, and there’s a little bit more to it than even what we just touched on today, but I think it’s just important to keep that in mind. I’ll give you another example, somebody a little bit different from Jane and of course we’ll call him John. So John and his wife recently retired, just retired last year, late last year in 2020, around 700, 750,000 or so saved up in the IRA, no pension, both have social security benefits. And as we go through the planning process for them, they’ve been clients for about 10 or 12 years now as well, but they really need about three and a half, maybe 4% required return to make their plan work.

Kevin Kroskey:                  And when you think about that, and again, if cash is paying you point something and bonds aren’t paying you that much more, you should be able to then think through that, hey, they certainly have a higher required return than what cash or a high-quality investment is going to likely yield to them over time. So said another way, they’re going to have to take some equity market risks, some stock risk. But if you go up too high on that stock risk category and you go through that sort of stress test, what we see is, they have some capacity for risk, so they have a certain hurdle rate that they need to make for the required return. So they can’t go really below that, or their plan is not going to work; they’re going to have to make some changes to their lifestyle.

Kevin Kroskey:                  Or they’re going to have to get a little bit higher return, meet their goal, then get a higher return than what cash and bonds are going to pay for them. But if they were to be, say, 80% or a 100% in stocks and you go through that stress test, what we see is they don’t have that much risk capacity. That sort of portfolio could be quite detrimental. And similarly, where if they’re too conservative, they’re going to have to make some lifestyle changes. If they’re too aggressive and things go wrong, they’re going to have to make some lifestyle changes too. It’s two sides, I wouldn’t say it’s the same coin, but on the one hand, if you’re more conservative than really what you need to be and you’re not going to make that required return hurdle rate over time, it’s a really slow way to go broke over time.

Kevin Kroskey:                  On the other hand, if you’re really leading in with the chin and taking too much risk and something bad happens like the tech bubble burst in 2008, things along those lines where you really get a big hiccup early on when you’re pulling money out from the account, you’re going to feel it more immediate there, but both of them are going to end up resulting in having to pull back from your goals, having that lifestyle risk realize where you’re just going to have to make some changes. So for John and his wife, in this case, it was really a sweet spot. They needed to have somewhere around a third, maybe no more than two-thirds of their money in stocks, and knowing that we had that and had a well-diversified portfolio overall, then we could navigate these different environments.

Kevin Kroskey:                  So, on the one hand, we had the expectation that the return objective was going to be met, their hurdle rate was going to be met. On the other hand, we weren’t taking so much risk where if something bad happened and the market sold off and we got into recession, and it was bad for a few years that they were going to have to cut back right away. Rather, we still had plenty of reserves in higher-quality bonds that, yes, they weren’t probably going to be doing a whole heck of a lot in terms of providing returns because interest rates are low but nonetheless, they were there for preservation; they were there for diversification and gave us some higher-quality assets that we could pull from if the stock market sold off a good bit.

Kevin Kroskey:                  So where Jane really could be as conservative or as aggressive as she wanted to be based on a risk capacity, but she really didn’t feel comfortable from an attitudinal standpoint, John and his wife were comfortable with risk and were actually asking about increasing the risk but when I walked them through their financial plan and just show them their risk capacity and really if, hey, you can meet your goals, but if we go more up the risk spectrum and things don’t work out that well for whatever reason, whether it’s a pandemic, hopefully, you don’t have two planes flying into a building in New York City again and things along those lines, but whatever the reason, if you’re taking too much risk and you have an inopportune time, you’re going to have a similar result where you’re going to have to make some cutbacks. But if we were a little bit lower on the risk spectrum, we can meet their goals, they can have a lifestyle that they wanted, and they thought that was a good trade-off to have.

Walter Storholt:                Great conversations that anybody can have with proper planning, and it just helps really set up the rest of the plan for success when you start it the right way. We talked a little bit about how Kevin and the True Wealth Designs teams planning process is a little bit different in the last episode when we were talking about Maslow’s hierarchy of needs, again, just sort of that outside the box different type of approach to planning. And I think this different approach to the risk conversation, whether it’ll be tailored as risk tolerance or approached as risk capacity and some of the other ways that you look at it, Kevin, just goes to show the really in-depth nature in which you and your team look at financial plans and start planning for somebodies financial future. And so, if you have questions about this, please reach out to Kevin.

Walter Storholt:                If you have anything on your mind that you want to go over, want to go through the full planning process, a great way to start is to go to truewealthdesign.com, click on the, Are We Right For You button, and you can schedule a 15-minute call with an experienced financial advisor on the True Wealth team, it’s very easy to do that. Again, truewealthdesign.com and click on the, Are We Right For You button. Or if you like the old-fashioned way, you can pick up the phone and call 855-TWD-PLAN, that’s 855-893-7526. Check the show notes or the description of today’s program for that contact information and links to relevant info if you need it.

Kevin Kroskey:                  And Walter, one thing, I’ll give a bit of a, I wouldn’t say a warning, but pull back the curtains a bit here. So one of the things that become more prevalent over the last several years is there are different software programs that are using these risk questionnaires, advisors are using, they’re also just freely available online, most of them are not, I wouldn’t say they’re not well constructed, but they don’t meet the statistical requirements of being valid, of being reliable of those sorts of psychometric tests that I talked about. On the one hand, you have a lot of financial advisors using these, asking, hey, what’s your risk score? Stress-test your portfolio, and it’s really more of a sales and marketing tool.

Kevin Kroskey:                  And again, the way that we talked about today, again, this is the way that we’ve done it, but my opinion but, hey, it’s my show, it really starts with a plan. You have to have a well-constructed financial plan, and if a lot of advisors aren’t doing a well-constructed financial plan, it’s just garbage in garbage out process, then it really doesn’t matter what your quote-unquote, risk score, or something like that is. A lot of these tests are, again, there’s a technology revolution that’s going on, not just in our industry, they call it FinTech, but in so many different industries, whether it’s Tesla, Uber, you name it, so we’re all aware of that.

Kevin Kroskey:                  But I’ve seen a lot of these risk software that are out there, and they may look nice, they may have cool graphics, they may make it easy, but they generally aren’t effective. So it’s just like anything; it’s a little bit more complicated than maybe what it seems upfront. It’s not a bad starting point to do some of these, but the best way, again, in my view and this is why we’ve evolved here, and it’s the same thing that I learned in my continuing education class yesterday, it starts with a financial plan, it starts with who you are and measuring your required return and risk capacity and then getting into these other aspects of risk.

Walter Storholt:                Make sure you’re doing it the right way, and, again, if you have any questions, feel free to reach out to Kevin to talk a little bit more about this. Again, you can go to truewealthdesign.com, click the, are we right for you button, the best way to start. Kevin, thanks for the help and the conversation today. I enjoyed it.

Kevin Kroskey:                  I always appreciate it Walter, thank you.

Walter Storholt:                We’ll talk to you again in a couple of weeks. Everybody, thanks for joining us, and we’ll talk to you soon right back here on Retire Smarter.

Disclaimer:                          Information provided is for informational purposes only and does not constitute investment tax or legal advice. Information is obtained from sources that are deemed to be reliable, but their accurateness and completeness cannot be guaranteed. All performance reference is historical and not an indication of future results. Benchmark indices are hypothetical and do not include any investment fees.