What Cash-flows Are Incorporated in Investor Risk Tolerance Assessment Tools?

Tolerisk® is the most innovative risk tolerance assessment tools on the market, largely because it uses a scientific approach when determining an individual’s risk tolerance level. Here’s a look at some of the elements that are considered and incorporated while generating a Tolerisk® risk tolerance assessment report.

Tax Status of Assets

Tolerisk® allows for 3 different tax statuses of both assets and savings to be considered during the risk tolerance assessment process. Simple arrays and custom arrays can be used for all types of assets and savings that are entered into the risk tolerance assessment tool.

• Taxable Accounts — After tax savings that is ultimately distributed prior to or during retirement.
• Pre-tax Retirement Accounts — This includes several different types of pre-tax retirement accounts, such as a traditional IRA, 401k or a 403b. Savings prior to retirement as well as distributions, including RMDs, are incorporated into the cash-flows considered during the risk tolerance assessment process.
• Post-tax Retirement Accounts — This typically includes Roth IRA and Roth 401k accounts. Savings and distributions are included in the risk tolerance assessment analysis.

Capital Expenditures

Tolerisk® also allows you to include capital expenditures in your risk tolerance assessment. Capital expenditures that may be relevant include large expenses that are not included in the typical annual expenses, such as college tuition for your children, a wedding, or the down payment on a piece of real estate. As these custom cash flows will vary from person to person, Tolerisk® provides you with the opportunity to schedule the data as a present or future value. This ensures that the report you receive an accurate representation of your capital expenditures.

Capital Inflows

Capital inflows may be important to include in a risk tolerance assessment. Capital inflows might include an expected inheritance, proceeds generated from the sale of a business, or proceeds anticipated from the sale of real estate or the downsizing of a home. Similar to capital expenditures, capital inflows can be recorded as a present or future value within the software.

Retirement Income

Tolerisk® allows you to incorporate a variety of retirement income streams, including Social Security, which is indexed to inflation and a Defined Benefit Pension, which is static. You can add custom retirement income cash-flows to reflect investment property income, fixed rate annuities, or other unique cash-flows. As with all custom cash-flows in Tolerisk®, you can specify the start and end date, as well as any annual increases and if it’s a present value or future value cash-flow.

The customizable features available on Tolerisk® help it stand out from competitors, which often focus on simplistic questionnaires that result in vague personality centric results. With Tolerisk®, you are able to customize the assessment to fit the unique circumstances of your individual clients, and ultimately provide them with scientific results that they can use as they create an investment management strategy. To learn more about the features of Tolerisk® and how it can help you improve your customer relationships and client satisfaction ratings, begin your free trial today.