Corporate & Securities Law

Investment advisers owe their clients the highest fiduciary duty known in the law.  You wouldn't expect to hear an investment adviser saying, "Throw the nonsense 'risk tolerance' baloney out the window," yet that's exactly what investment adviser Ken Fisher says in his book, The Only Three Questions That Count.

Risk tolerance is one aspect of the suitability inquiry that investment advisers, brokers and others recommending investments must make before they can recommend that investment.  An important principle is that advisers and brokers, not their clients, are the individuals charged with the obligation of determining investment suitability, including risk tolerance.  Another important principle that follows is that advisers and brokers do not satisfy their duty to determine risk tolerance by disclosing that risk exists. 

As one can see, determining risk tolerance is a fundamental duty.  Let's hope that investment advisers and brokers learn that fact and incorporate it in their investment recommendations.  If not, those persons have breached their duties to their customers.