Financial planners have been warned to obtain advice about any obligations regarding the quality of the financial advice they give. June Smith Acting CEO of the Financial Planning Association (FPA), says it isn’t a planner’s job to help clients avoid investment risk altogether. Rather they should assist them to “learn to embrace and manage reasonable investment risks to achieve their desired investment goals”. In other words, teach them that profit is always accompanied by risk.

A new FPA policy position paper on risk tolerance suggests planners today act as educators, but the range of advice they give “is not limitless”. Ms Smith says they should seek advice on their obligations concerning providing quality of advice. 

Other major recommendations in the report suggest planners should assess a client’s investment risk tolerance and apply that assessment when formulating advice. The assessment should revolve around the “tolerance of the client’s volatility to income and capital fluctuation” over the short and long term.