ASIC financial adviser exam, Client profiles, life stages and risk question: shape Callum's advice

Answer: B. Her capacity for loss, which is low whatever her stated tolerance

Risk tolerance is a client's willingness to accept volatility; risk capacity is her financial ability to absorb losses without harming her goals. Rhonda has one pool of savings and starts drawing on it next month, so a large early fall could permanently cut her income (sequencing risk). Advice must rest on her relevant circumstances and be appropriate (Corporations Act 2001 ss961B(2)(f), 961G, compilation 19 Sep 2026); Hunt (2016), on ASIC's reading list, explains the limits of stated risk attitudes. Her stated tolerance is real and should be discussed, but a preference does not create the capacity to recover. A '100 minus age' rule ignores her drawdowns and her lack of other assets. A long retirement does matter, yet with withdrawals starting at once, early losses are the bigger threat.