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GUIDE TO INVESTOR RISK PROFILES Financial Advice Centre Ltd Risk profile descriptions Profile 1 – No investment risk You are extremely risk averse with no tolerance to investment risk. You probably worry more than most people about the possibility of poor investment outcomes and will usually suffer from severe regret if investment decisions turn out badly. You are not comfortable with taking any investment risk and ensuring all of your capital is safe is your main priority. You want the potential to earn interest on your savings and in normal circumstances would expect to get a full return of your capital. You accept that any returns are unlikely to keep pace with inflation, so your money is likely to be worth less in real terms in the future. Likely assets: You are likely to save all your money in cash deposits or similar. Likely capital gains / losses: This is solely contained as Cash and, therefore, returns would reflect investment performance. Losses would be inapplicable as all capital would be guaranteed (subject to FSCS guarantee levels). Typical Benchmark return 2.5% per annum over a 10 year period (This benchmark is an estimation of the returns that can be created in certain market conditions and therefore should not be viewed as a ‘guaranteed return’ for this risk rating) Asset allocation for Quarter Four 2012 Rolling 12 Months Cash/Money Markets 100% Bond/Gilts/Property Fixed Interest 0% Equities 0% In depth asset allocation Cash – 100% Gilts and Investment grade bonds – Nil Corp Bonds -Nil High Yield & Emerging Market bonds – Nil Property – Nil UK Equity (Low Volatility) – Nil UK Equity (High Volatility) – Nil Overseas Equity– Nil Emerging Market Equity – Nil Profile 2 – Risk averse You are risk averse with a very low tolerance to investment risk. You probably worry more than most people about the possibility of poor investment outcomes and will usually suffer from severe regret if investment decisions turn out badly. You are only prepared to take a very small amount of investment risk over the medium to long term and ensuring preservation of your capital is very important to you. You want the potential to obtain modest returns, but accept that the likelihood of growth above inflation is very limited, so your money may be worth less in real terms in the future. You accept that your investments may rise and fall in value, generally only by a small amount, but that small losses may occur. Likely assets: You are likely to invest the vast majority of your money in a combination of cash and low risk assets, with the vast majority in cash. The remainder of your money could be held in equities, with the vast majority in developed markets and very limited exposure to emerging markets. Likely capital gains / losses: A Risk Averse portfolio invested over a 3 year period the portfolio would, during its worst 3 months have lost 14.3% (between 01/09/2008 – 30/11/2008). The best 3 month period would shown a portfolio gain of 15.9% (01/04/2009 – 30/06/2009). (Source: Standard Life WRAP Risk Averse Portfolio) This area can also be tailored to meet yields required for clients taking small amounts of Income from their Investments. Typical Benchmark return 3% per annum over a 10 year period (This benchmark is an estimation of the returns that can be created in certain market conditions and therefore should not be viewed as a ‘guaranteed return’ for this risk rating) Asset allocation for Quarter Four 2012 - Rolling 12 Months Cash/Money Markets 20% Bond/Gilts/Property Fixed Interest 80% Equities 0% In depth asset allocation Cash – 20% Gilts and Investment grade bonds – 30% Corp Bonds -30% High Yield & Emerging Market bonds – 10% Property – 10% UK Equity (Low Volatility) – Nil UK Equity (High Volatility) – Nil Overseas Equity– Nil Emerging Market Equity – Nil Profile 3 – Very cautious You have a very cautious approach to investment risk. You probably worry more than most people about the possibility of poor investment outcomes and will usually suffer from regret if investment decisions turn out badly. You are only prepared to take a small amount of investment risk over the medium to long term and ensuring preservation of your capital is important to you. You want the potential to match or beat inflation; in order to achieve this potential you accept that your investments may rise and fall in value fairly frequently, generally only by relatively small amounts, but that small losses may occur. Likely assets: You are likely to invest the majority of your money in a combination of cash and low risk assets, with the majority in fixed income funds or similar. The remainder of your money could be held in property and equities, with the majority of equity funds in developed markets and limited exposure to emerging markets. Likely capital gains / losses: A Very Cautious risk portfolio invested over a 3 year period the portfolio would, during its worst 3 months have lost 17.4% (between 01/09/2008 – 30/11/2008). The best 3 month period would shown a portfolio gain of 14.0% (between 01/07/2009 – 30/09/2009). (Source: Standard Life WRAP Very Cautious Portfolio) This area can also be tailored to meet yields required for clients taking small amounts of Income from their Investments. Typical Benchmark return 4% (This benchmark is an estimation of the returns that can be created in certain market conditions and therefore should not be viewed as a ‘guaranteed return’ for this risk rating) Asset allocation for Quarter Four 2012 - Rolling 12 Months Cash/Money Markets 15% Bond/Gilts/Property Fixed Interest 65% Equities 20% In depth asset allocation Cash – 15% Gilts and Investment grade bonds – 20% Corp Bonds -25% High Yield & Emerging Market bonds – 10% Property – 10% UK Equity (Low Volatility) – 10% UK Equity (High Volatility) – Nil Overseas Eq– 10% Emerging Market Equity – Nil Profile 4 – Cautious You have a cautious approach to investment risk. You probably worry more than most people about the possibility of poor investment outcomes and will usually suffer from regret if investment decisions turn out badly. You are prepared to take some investment risk over the medium to long term, but ensuring preservation of your capital is still important to you. You want the realistic potential to match or beat inflation; in order to achieve this potential you accept that your investments may rise and fall in value fairly frequently, generally only by relatively small amounts, but that modest losses may occur. Likely assets: You are likely to invest all of your money in a combination of low risk and equity assets, with the majority in fixed income funds or similar. The remainder of your money could be held in property and equities, with the majority of equity funds in developed markets, but with some exposure to emerging markets. Likely capital gains / losses: A Cautious risk portfolio invested over a 3 year period the portfolio would, during its worst 3 months have lost 18.0% (between 01/09/2008 – 30/11/2008). The best 3 month period would shown a portfolio gain of 14.3% (between 01/07/2009 – 30/09/2009). (Source: Standard Life WRAP Risk Averse Portfolio) This area can also be tailored to meet yields required for clients taking small amounts of Income from their Investments. Typical Benchmark return 5% (This benchmark is an estimation of the returns that can be created in certain market conditions and therefore should not be viewed as a ‘guaranteed return’ for this risk rating) Asset allocation for Quarter Four 2012 - Rolling 12 Months Cash/Money Markets 10% Bond/Gilts/Property Fixed Interest 55% Equities 30% In depth asset allocation Cash – 10% Gilts and Investment grade bonds – 15% Corp Bonds -20% High Yield & Emerging Market bonds – 15% Property – 10% UK Equity (Low Volatility) – 10% UK Equity (High Volatility) – 5% Overseas Eq- 10% Emerging Market Equity – 5% Profile 5 – Moderately cautious You have a moderately cautious approach to investment risk. Like most people, you probably worry about the possibility of poor investment outcomes, but don’t tend to dwell on any investment decisions that turn out badly. You are prepared to take a modest amount of investment risk over the medium to long term and growth potential is equally as important as ensuring preservation of capital. You want the realistic potential for growth above inflation; in order to achieve this potential you accept that your investments may rise and fall in value frequently, by more than a small amount and that moderate losses may occur. Likely assets: You are likely to invest all of your money in a combination of low risk and equity assets, with the majority in fixed income funds or similar, but with significant amounts in property and equities. Your equity funds are likely to focus on developed markets, but with some exposure to emerging markets. Likely capital gains / losses: A Moderately Cautious risk portfolio invested over a 3 year period the portfolio would, during its worst 3 months have lost 17.5% (between 01/09/2008 – 30/11/2008). The best 3 month period would shown a portfolio gain of 16.7% (between 01/07/2009 – 30/09/2009). (Source: Standard Life WRAP Risk Averse Portfolio) This area can also be tailored to meet yields required for clients taking small amounts of Income from their Investments. Typical benchmark return 6% (This benchmark is an estimation of the returns that can be created in certain market conditions and therefore should not be viewed as a ‘guaranteed return’ for this risk rating) Asset allocation for Quarter Four 2012 - Rolling 12 Months Cash/Money Markets 8% Bond/Gilts/Property Fixed Interest 52% Equities 40% In depth asset allocation Cash – 8% Gilts and Investment grade bonds – 8% Corp Bonds -16% High Yield & Emerging Market bonds – 18% Property – 10% UK Equity (Low Volatility) – 15% UK Equity (High Volatility) – 10% Overseas Eq– 10% Emerging Market Equity – 5% Profile 6 – Moderate You have a moderate tolerance to investment risk. You probably worry slightly less than most people about the possibility of poor investment outcomes and don’t tend to regret poor investment decisions. You are prepared to take a moderate amount of investment risk over the medium to long term and ensuring preservation of capital is less important to you than growth potential. You want the realistic potential for growth above inflation; in order to achieve this potential you accept that your investments may rise and fall in value frequently, occasionally by a significant amount and that moderate losses may occur. Likely assets: You are likely to invest all of your money in a combination of low risk and property/equity assets, in roughly equal proportions. You are likely to invest in fixed income funds or similar, alongside property and equity funds. Your equity funds are likely to be in developed markets, but with moderate exposure to emerging markets. Likely capital gains / losses: A Moderate risk portfolio invested over a 3 year period the portfolio would, during its worst 3 months have lost 17.5% (between 01/09/2008 – 30/11/2008). The best 3 month period would shown a portfolio gain of 16.7% (between 01/07/2009 – 30/09/2009). (Source: Standard Life WRAP Risk Averse Portfolio) This area can also be tailored to meet yields required for clients taking larger amounts of Income from their Investments. Typical benchmark return 7% (This benchmark is an estimation of the returns that can be created in certain market conditions and therefore should not be viewed as a ‘guaranteed return’ for this risk rating) Asset allocation for Quarter Four 2012 - Rolling 12 Months Cash/Money Markets 5% Bond/Gilts/Property Fixed Interest 40% Equities 55% In depth asset allocation Cash –5% Gilts and Investment grade bonds – 6% Corp Bonds -12% High Yield & Emerging Market bonds – 14% Property – 8% UK Equity (Low Volatility) – 15% UK Equity (High Volatility) – 15% Overseas Eq– 15% Emerging Market Equity – 10% Profile 7 – Moderately adventurous You have a moderately high tolerance to investment risk. You worry less than most people about the possibility of poor investment outcomes and accept that occasional poor returns are a necessary part of long-term investment. You are prepared to take a moderately high level of investment risk over the medium to long term and ensuring preservation of capital is less important to you than growth potential. You want the realistic potential for growth significantly above inflation; in order to achieve this potential you accept that your investments are quite likely to rise and fall in value frequently and significantly and that relatively large losses may occur. Likely assets: You are likely to invest all of your money in a combination of low risk and property/equity assets, with a slight majority in property and equities. You are likely to invest in fixed income funds or similar, alongside property and equity funds. Your equity funds are likely to be in developed markets, but with significant exposure to emerging markets. Likely capital gains / losses: A Moderately Adventurous risk portfolio invested over a 3 year period the portfolio would, during its worst 3 months have lost 17.5% (between 01/09/2008 – 30/11/2008). The best 3 month period would shown a portfolio gain of 16.7% (between 01/07/2009 – 30/09/2009). (Source: Standard Life WRAP Risk Averse Portfolio) This area can also be tailored to meet yields required for clients taking larger amounts of Income from their Investments. Typical benchmark return 8% (This benchmark is an estimation of the returns that can be created in certain market conditions and therefore should not be viewed as a ‘guaranteed return’ for this risk rating) Asset allocation for Quarter Four 2012 - Rolling 12 Months Cash/Money Markets 5% Bond/Gilts/Property Fixed Interest 30% Equities 65% In depth asset allocation Cash –5% Gilts and Investment grade bonds – 6% Corp Bonds -12% High Yield & Emerging Market bonds – 12% Property – Nil UK Equity (Low Volatility) – 15% UK Equity (High Volatility) – 20% Overseas Eq– 15% Emerging Market Equity – 15% Profile 8 – Adventurous You have an adventurous approach to investment risk. You worry much less than most people about the possibility of poor investment outcomes and accept that periodic poor returns are a necessary part of long-term investment. You are prepared to take a high level of investment risk over the medium to long term and ensuring preservation of capital is much less important to you than growth potential. You want the realistic potential for growth significantly above inflation; in order to achieve this potential you accept that your investments are quite likely to rise and fall in value frequently and significantly and that large losses may occur. Likely assets: You are likely to invest all of your money in a combination of low risk and property/equity assets, with the majority in property and equities. You are likely to invest in fixed income funds or similar, alongside property and equity funds. Your equity funds are likely to be in developed markets, but with significant exposure to emerging markets. Likely capital gains / losses: An Adventurous risk portfolio invested over a 3 year period the portfolio would, during its worst 3 months have lost 21.7% (between 01/09/2008 – 30/11/2008). The best 3 month period would shown a portfolio gain of 20.5% (between 01/07/2009 – 30/09/2009). (Source: Standard Life WRAP Risk Averse Portfolio) This area can also be tailored to meet yields required for clients taking larger amounts of Income from their Investments. Typical benchmark return 10% (This benchmark is an estimation of the returns that can be created in certain market conditions and therefore should not be viewed as a ‘guaranteed return’ for this risk rating Asset allocation for Quarter Four 2012 - Rolling 12 Months Cash/Money Markets 3% Bond/Gilts/Property Fixed Interest 22% Equities 75% In depth asset allocation Cash –3% Gilts and Investment grade bonds – Nil Corp Bonds -8% High Yield & Emerging Market bonds – 14% Property – Nil UK Equity (Low Volatility) – 10% UK Equity (High Volatility) – 25% Overseas Eq– 20% Emerging Market Equity – 20% Profile 9 – Highly adventurous You have a highly adventurous approach to investment risk. You worry much less than most people about the possibility of poor investment outcomes and accept that periodic poor returns are a necessary part of long-term investment. You are prepared to take a very high level of investment risk over the medium to long term and ensuring preservation of capital is not a significant concern for you. You want the realistic potential for a very high return on your capital and are willing to take investment risk with most, if not all, of your capital in order to achieve this potential. You accept that your investments are likely to rise and fall in value frequently and significantly and that very large or even total losses may occur. Likely assets: You are likely to invest all of your money in a combination of low risk assets and property/equity assets, with the vast majority in property and equities. You are likely to invest in fixed income funds or similar, alongside some property and equity funds. Your equity funds are likely to be in developed markets, but with significant exposure to emerging markets Likely capital gains / losses: A Highly Adventurous portfolio invested over a 3 year period the portfolio would, during its worst 3 months have lost 23.9% (between 01/09/2008 – 30/11/2008). The best 3 month period would shown a portfolio gain of 21.9% (between 01/07/2009 – 30/09/2009). (Source: Standard Life WRAP Risk Averse Portfolio) This area can also be tailored to meet yields required for clients taking larger amounts of Income from their Investments. Typical benchmark return 11% (This benchmark is an estimation of the returns that can be created in certain market conditions and therefore should not be viewed as a ‘guaranteed return’ for this risk rating) Asset allocation for Quarter Four 2012 - Rolling 12 Months Cash/Money Markets 2% Bond/Gilts/Property Fixed Interest 13% Equities 85% In depth asset allocation Cash – 2% Gilts and Investment grade bonds – Nil Corp Bonds -5% High Yield & Emerging Market bonds –8% Property –Nil UK Equity (Low Volatility) – 10% UK Equity (High Volatility) – 35% Overseas Eq– 10% Emerging Market Equity – 30% Profile 10 – Speculative You have a speculative approach to investment risk. You are not concerned about the possibility of poor investment outcomes and even enjoy the ‘thrill’ of making more risky investment decisions. You are prepared to take a very high level of investment risk over the medium to long term and ensuring preservation of capital is not a concern for you. You want the realistic potential for a very high return on your capital and are willing to take considerable amounts of risks with most, if not all, of your capital in order to achieve this potential. You accept that your investments are likely to rise and fall in value frequently and significantly and that very large or even total losses may occur. Likely assets: You are likely to invest all of your money in equities, with the majority held in developed markets, but with significant exposure to emerging markets. Likely capital gains / losses: A Speculative risk portfolio invested over a 3 year period the portfolio would, during its worst 3 months have lost 25.1% (between 01/09/2008 – 30/11/2008). The best 3 month period would shown a portfolio gain of 22.1% (between 01/07/2009 – 30/09/2009). (Source: Standard Life WRAP Risk Averse Portfolio) This area can also be tailored to meet yields required for clients taking larger amounts of Income from their Investments. Typical benchmark return 12% (This benchmark is an estimation of the returns that can be created in certain market conditions and therefore should not be viewed as a ‘guaranteed return’ for this risk rating) Asset allocation for Quarter Four 2012 - Rolling 12 Months Cash/Money Markets 1% Bond/Gilts/Property Fixed Interest Nil Equities 99% In depth asset allocation Cash – 1% Gilts and Investment grade bonds – Nil Corp Bonds -Nil High Yield & Emerging Market bonds –Nil Property –Nil UK Equity (Low Volatility) – 15% UK Equity (High Volatility) – 40% Overseas Eq– 14% Emerging Market Equity – 30%