Advised investors are bolder with their finances

Survey suggests that working with advisors increases comfort with taking calculated risks

Advised investors are bolder with their finances

It’s only natural for investors to minimize losses to their investment portfolios, especially as retirement-funding challenges — rising healthcare costs, longer life expectancies, and increasing costs of debt, to name a few — weigh on their minds. But a new survey suggests that people are taking their appetite for safety to an unhealthy extreme.

In a study of American adults aged 18 years old and above, Northwestern Mutual asked respondents to rate their risk tolerance on a scale of 1 to 10, reported ThinkAdvisor. Those who worked with an advisor reported an average risk tolerance of 5.2, while those without advisors had an average risk tolerance of just 4.6.

Interestingly, US adults who identified themselves as highly disciplined planners — investors who have exact goals and specific plans from which they rarely deviate — reported an average risk tolerance of 5.3

When asked how likely they were to take calculated risks with their finances, 72% of US adults in the survey said they were more comfortable paring risk in their savings and investments for the sake of safety and stability — even if it meant potentially lower returns.

The appetite for defensiveness was even clearer from findings on financial risk tolerance — how comfortable they are with taking financial risks in pursuit of financial returns. The score for the average American was 4.9 out of 10, with 30% of respondents falling within the 1-3 low-tolerance range, as compared to just 14% who were in the 8-10 high-tolerance range.

“The instinct to preserve and protect is evident in these numbers, and while that’s a positive and healthy tendency, it’s also possible to be overly cautious due to uncertainty,” said Emily Holbrook, senior director of planning at Northwestern Mutual. “The takeaway here is that getting the right financial guidance can give you clarity to take calculated risks.”


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