Sungard's Frontier Allocation Master allows you to edit the number of risk levels to a maximum of five with customized percent breakpoints. Sungard also permits you to customize its questionnaire with your own questions or by matching questions to an established risk profiling system. Unless you have a truncated (or customized) version of this software from your broker-dealer, you may be able to adjust the addressable risk levels measured by the efficient frontier in this software to match (or nearly match) whatever risk scoring system you may decide to use. This is an important aspect of linkage and the ease with which you can document the resulting portfolio recommendations to a process that began with the client's own perception of their risk tolerance. Even if all you are using is a ten-question profile developed within a software package as part of a larger software functionality (i.e., a financial planning software package or, in the case of Morningstar's Advisor Workstation, an asset management software platform), having the ability to directly link the client's risk tolerance to the resulting portfolio is a key to protecting your client and yourself.
David Lawrence owns David Lawrence and Associates, a financial practice consulting firm, based in Lutz, Fla.