Quintin looks at how stress testing can help estimate portfolio impacts with restructuring to limit the downside. With guidance, advisers may be able to help protect clients’ portfolios, giving an opportunity to add real value.
Meaningfully assessing portfolio risks is difficult. Conventional risk measures may not capture all risks, particularly under challenging market conditions. Portfolio stress testing helps identify and quantify risks, helping reassure advisers how portfolios might respond to significant market events or particular concerns, and supporting advisers to add value for their clients.
This article forms a helpful introduction to financial advisers less familiar with portfolio stress-testing.
Q G Rayer (2017), Testing ground, Personal Finance Professional, www.thepfs.org, Summer 2017, 9 June 2017, p38-39.