How is your Wealth Manager talking to you about risk?

I find the whole risk conversation fascinating.  It is part art and part science.  It brings your left brain and right brain into conflict.  Portfolio Risk or "Downside Risk" is broker-ese for "someday you will experience this".

Risk is really getting a fix on:
1) What risk do you need
2) What risk are you willing to take
3) What risks are worth taking?

The Risk You Need is typically found in some sort of financial planning software to determine what is the risk necessary to achieve your goals.

The Risk You are Willing To Take is found in several new tools like Riskalyze where you are looking at stuff independently.  These software programs do have their flaws (timeframe being the biggest one), but it reminds me of going to the optometrist and giving me an objective calibration.  With my clients, I like to track how these answers change over time, given current market conditions and use that to play devil's advocate if I see a significant change.

Risks worth taking are maintaining your asset allocation, but potentially changing what you own (I do this based on what I read from Riverfront Investment Group, Barry Ritholtz, and Meb Faber).  Your capital market assumptions are another important ingredient.

I consider these questions to be lighthouses for my clients that generate three lines of bearing and it allows me to get a decent fix on their position.

How do you think of risk?