Which factor is NOT typically used to assess a client's risk tolerance?

• A. Time horizon
• B. Investment objectives
• C. Regulatory requirements
• D. Capacity for loss

Answer: (C)

Assessing risk tolerance hinges on understanding a client’s willingness and ability to endure investment losses. Time horizon matters because a longer runway lets a portfolio weather short-term fluctuations, so taking on more risk can be appropriate. Investment objectives shape the desired outcomes and the level of risk that aligns with those goals. Capacity for loss reflects the financial cushion the client has to absorb negatives without derailing plans. Regulatory requirements, while important for compliance and portfolio feasibility, are not used to measure how much risk a client is willing to accept; they set external boundaries rather than reflect personal risk preferences. So the factor that isn’t typically used to assess risk tolerance is regulatory requirements.