Volatilityscore.com is a risk tolerance questionnaire and asset allocation reporting system designed to help advisor's better link their client's risk tolerance with the appropriate portfolio. Investor's risk tolerance has been studied thousands of times over the years and is generally defined as an individual's willingness to take risk in their investment portfolios. According to many studies, it has been determined that about 90% of a portfolio's variation is dependent on that portfolio's asset allocation, with stock selection, market timing and other factor's playing a lesser role in determining an investor's portfolio returns and volatility. Asset allocation relies on the fact that the returns of different asset classes (such as stocks and bonds) are not highly correlated and asset class diversification can help optimize risk-adjusted returns. Asset allocation does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk.

Many other academic studies, including the 2008 study by Dalbar, Inc entitled "Quantitative Analysis of Investor Behavior", show that investors are most often their worst enemies. Dalbar's study indicates that investors often buy and sell at the worst possible times - and achieve poor returns as a result. Volatilityscore.com was developed in an attempt to match investors risk tolerance with the appropriate portfolio. No age, income, gender or other traditional stereotypes are used to develop an investor's Volatility Score - only a points based score that indicates what percentage of a client's investment portfolio should be invested in "risk assets" such as equities. We strongly feel this unemotional approach can help advisors build portfolios that are designed to help clients achieve long-term success and avoid big mistakes such as market timing or pulling funds out of the market during scary times.

The Questionnaire

The 15-question Volatility Score questionnaire was developed based on academic research, experience from our founder Benjamin Ebert leading his investment firm, and the compliance requirements placed on all financial advisors to measure their clients' risk tolerance.Risk tolerance is an investor's general ability to withstand risk inherent in investing. This risk tolerance questionnaire is designed to determine your risk tolerance and is judged based on three factors: time horizon, long-term goals and expectations, and short-term risk attitudes. The adviser uses their own experience and subjective evaluation of your answers to help determine your risk tolerance.

There is no guarantee that the risk assessment questionnaire will accurately assess your tolerance to risk. In addition, although the advisor may have directly or indirectly used the results of this questionnaire to determine a suggested asset allocation, there is no guarantee that the asset mix appropriately reflects your ability to withstand investment risk.

The questionnaire provides real world scenarios for investors to respond to. Each response is assigned its own numerical score, which investors don't see initially, and the aggregate score [the Volatility Score] tells investors and advisors what percentage of the client's portfolio should be allocated to risk assets - such as stocks, versus defensive assets such as bonds. Advisors can then build a portfolio matched to their client's risk tolerance, while educating investors on why that specific portfolio was chosen for them.

The Volatility Score Report

With Volatilityscore.com, investors will know exactly why the portfolio their financial advisor has chosen is appropriate for them. The Volatility Score questionnaire can also be redone with investors as many times as necessary over time, to help educate investors and assure financial advisors that they have the appropriate asset allocation for their client.

The team at Volatilityscore.com has developed model asset allocation portfolios that correlate to each investors' Volatility Score. While no risk measurement system can be 100% accurate, research indicates that aligning investors risk tolerance with the most suitable asset allocation for that investor is more likely to lead to long-term success. We have divided our Volatility Score ranges into deciles - groups of ten - with 3 main Model Portfolio Groups: Conservative, Moderate and Aggressive.

The Conservative model portfolios are for an income-oriented investor seeking current income with minimal risk to principal, is comfortable with only modest long-term growth of principal, and with a short to mid range investment time horizon.

The Moderate model portfolios are for investors seeking to reduce volatility by including income-generating investments in their portfolios and accepting moderate principal growth. Moderate mode portfolio investors are willing to tolerate short-term market volatility and have at least mid- to long-term investment time horizons.

The Aggressive model portfolios are for growth-oriented investors seeking to maximize long-term returns, willing to tolerate potentially significant short-term volatility and with a long-term investment time horizon.

The Volatility Score reports show how a hypothetical portfolio with the recommended asset allocation might have performed over the last 25 years. Although no fees are imputed and investors should understand the hypothetical is simply a representation of how various assets classes have performed, investors can use the information to get a general estimate how of how certain asset allocations can affect portfolio growth. We believe the hypothetical growth chart adds value since it relies on the fact that a portfolio's asset allocation is the greatest indicator of performance.

Each of the model portfolios represent various combinations of three major indices: the S&P 500 Index (representing U.S. stocks), the MSCI ACWX Index (representing foreign stocks) and the Barclays Capital Aggregate Bond Index (representing U.S. bonds). These 3 indices are well known representatives for U.S. and foreign stocks and the bond market, in general. The time period they cover for the hypothetical growth figures used is the previous 25-year rolling period for each index.


Volatilityscore.com helps advisors meet their compliance needs with:

  • permanent online recordkeeping of Volatility Score questionnaires
  • tracking Volatility Score questionnaire responses for each advisor registered on the Volatility Score platform
  • helps ensure advisors are creating risk appropriate portfolios for their clients, addressing FINRA's suitability requirements (see FINRA Rule 2111)

Volatilityscore.com was created for financial advisors, by a financial advisor, not only to help financial advisors avoid compliance mishaps, but to help investors attain success with their financial goals. Advisors fill a vital role in helping their clients pursue long-term investment success and by aligning investor's risk tolerance with appropriate asset allocations, Volatilityscore.com helps advisors build and maintain successful investment practices.

Risk assessment that saves advisors time and helps clients better understand their risk profile.

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