Laudrup has no doubt Allen has the talent to succeed with the Reds, despite only working with him very briefly at Swansea, but has warned it is his mental toughness which will ultimately prove key.
"There are a lot of things to consider," he said. "Joe had only played one year at the highest level and then went there for a huge amount of money for a young midfielder.
"It was a lot of money and money brings pressure. The media and the fans have expectations because of the price, but you have to accept it.
"You cannot just play well once in a while like you can at the smaller clubs. That's the difference. He played a lot in the beginning but they have brought players in and there is a lot of competition but he has got a lot of talent.
"But I can only judge what I see on the pitch, I only had him for four days here after he came back from the Olympics so I do not know him well enough to have a big picture of his personality."
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