Which statement defines Attitude to Risk?

• A. The client’s willingness to accept fluctuations in the value of investments
• B. The client’s knowledge of investments
• C. The client’s personal opinion on the risks associated with making an investment, based on prior knowledge
• D. The client’s ability to absorb financial losses

Answer: (C)

Attitude to risk is about how a client views and feels about the risks involved in investing—their personal assessment and mindset shaped by what they already know. The statement that best fits this is that the client has a personal opinion on the risks associated with making an investment, based on prior knowledge. It highlights that attitude to risk is subjective and knowledge-influenced, focusing on perception rather than objective facts or outcomes.

Think of it as the way someone mentally reads risk: how risky they think an investment is and how comfortable they would be with that risk. This differs from how much they can actually absorb if a loss occurs (their financial capacity) or from their objective knowledge of investments.