Ch.12 · Model Portfolios and Asset Allocation · hard
A young investor with high income, zero debt, and a 20-year horizon for retirement states they have a 'conservative' risk tolerance. How should a distributor respond?
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EXPLANATION
When risk capacity (high) and stated risk tolerance (conservative) conflict, the distributor's responsibility is to educate — not override. The investor must understand that a very conservative allocation over 20 years may fail to meet their retirement goals due to inflation erosion. Education enables informed decision-making.
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