Having recently passed the Chartered Insurance Institute (CII) exam (RO2) on Investment Principles and Risk, I felt it was important to share with you a few of the complexities behind this prestigious qualification.

When choosing an Independent Financial Adviser (IFA), it’s essential to ensure that they are suitably qualified, trained, and take your financial future very seriously.  The CII exam (RO2) on Investment Principles and Risk contributes, in part, to the Financial Services Authority’s level 4 exam which, upon completion, is equivalent to an undergraduate certificate of higher education.  This means all IFAs qualified to this standard have a thorough understanding and knowledge of investments and the associated risks. 

Furthermore, the Financial Services Authority (FSA) monitors Independent Financial Advisers’ activity very carefully, and in particular enforces stringent controls regarding risk advice and mis-selling.  In a recent article, the FSA’s managing director of enforcement and financial crime, Margaret Cole, said, “The FSA requires IFAs to have robust procedures in place to ensure any advice given to customers is suitable.  Therefore, when recommending investment products, IFAs should take account of a customer's financial circumstances, their attitude to risk and what they hope to achieve by investing”.

Any IFA worth their salt should conduct a risk questionnaire, because it is crucial to really understand your precise attitude to risk so that they can recommend the most suitable and pertinent investment options.  Careful assessment is essential because most customers initially seek professional investment advice and give very little consideration to the risks involved.  Hence, the need to select a thorough and well qualified IFA; so you’re safe in the knowledge that every potential pitfall and danger has been explained in detail.

Risk is crucial when making a financial investment.  But the level of risk you’re willing to take depends greatly upon your outlook.  Some customers are happy to take big risks, whilst others are far more cautious.  The big risk-takers may enjoy big returns on their investments; however, the pitfalls could be great - and same for the losses.  It’s a gamble, and one that not everyone is willing to take.

So, what are your views about risk?  I would like to hear from you if you agree that attitude to risk needs to be handled with caution.  Alternatively, if you are considering investing money and would like to find out more about financial risk, then please contact me, Gerry Cummins at Cummins Financial Advisers Limited on 01244 571050 or click Chester Independent Financial Adviser to send me an email.