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Many advisors don’t understand risk.
I don’t mean they can’t assess the risk of an investment portfolio. They’re great at that. But they often apply different standards when it comes to assessing risk in their business and personal lives.
No risk can be risky
I have a lot of experience with risk. I’ve taken some big risks that worked out well and many that haven’t.
Here’s an epiphany: Sometimes, not taking a risk can be as risky (or more) than taking it.
You’ve probably had experience with clients who proudly state they’re “risk averse.” You may have explained to them that a portfolio of all bonds in a low interest rate environment is riskier that one with a modest allocation to stocks because of the ravages of inflation.
A similar misunderstanding of risk comes up when I’m asked by advisors about making a career change. I don’t feel qualified and don’t know what’s best for them. I want them to think correctly about the risks inherent in their decision. I ask them questions to explore their feelings, like: