Risk scores

To ensure that you invest only in portfolios that are suitable for your investment objectives, risk tolerance and financial capacity.

Client risk scores

Interactive Advisors assigns all Interactive Advisors clients a personal client risk score on a scale of one to five based on your responses to a risk questionnaire. Through this risk questionnaire, Interactive Advisors aims to reliably assess the following three key areas:

Investment objectives measure your goals in order to determine the extent of investment risk needed to achieve them.
Risk tolerance measures your willingness to take investment risk and your ability to withstand swings in the value of your investments.
Financial capacity measures your ability to take investment risk based on your financial situation.

Cautious

Growth

Growth plus

Aggressive

Speculative

Cautious

“My primary goal is cautious capital growth. While somewhat conservative, I am willing to accept some level of fluctuation in my portfolio value. I am comfortable investing mostly in ETFs, funds and large-cap equities, and am looking for generally lower risk than broad equity markets.”

Growth

“My primary goal is capital growth and I am willing to accept fluctuation in my portfolio value. I am comfortable investing in equities, and am looking for a similar risk profile to broad equity markets.”

Growth plus

“My primary goal is capital growth plus. I am willing to accept fluctuation in my portfolio value and prepared to accept leverage to achieve my investment goals. I am comfortable investing in both long and short equities, using leverage, and investing in concentrated portfolios. I am looking for a more complex portfolio or higher risk profile than broad equity markets.”

Aggressive

“My primary goal is aggressive capital growth. I am less concerned with the level of fluctuation in my portfolio value and I am prepared to take substantial risk to achieve my investment goals. I am comfortable investing in both long and short equities, using leverage, and investing in concentrated portfolios. I am looking for significantly higher risk than broad equity markets.”

Speculative

“My primary goal is speculative capital growth. I am prepared to take exceptional risk in my portfolio to achieve my investment goals, including taking speculative and concentrated positions in high risk securities. I am comfortable investing in both long and short equities, using leverage,and investing in concentrated portfolios. I am looking for significantly higher risk than broad equity markets.”

Portfolio risk scores

Initially before the launch of a portfolio on the platform and then at the beginning of every quarter thereafter, Interactive Advisors assigns each portfolio a risk score by combining:

Strategy review

The Investment Management team reviews for classification and adherence to previously stated objectives the portfolio managers’ description of the strategy and their answers to a questionnaire.

Risk metrics

The Investment Management team analyzes quantitative measures, based on the accounts historical holding and performance. Holding characteristics, such as concentration in individual securities and sectors, leverage and margin requirements and return and risk characteristics, such as volatility, VaR, drawdowns are used.

Portfolio rules

Interactive Advisors has established and enforces a set of trading rules that determine which trades are allowed to be replicated in client accounts’ based on their appropriateness for the risk level of the portfolio. For instance, certain types of trades (like short positions or leverage) are only appropriate for certain risk scores.

Client risk score >= Portfolio risk score

Your client risk score assists Interactive Advisors in determining which portfolios you may invest in. You may only invest in portfolios that have a risk score less than or equal to your own client risk score.