In the Handling Client Funds section, the concept of suitability was discussed. The best way to ensure that your investment advice or financial planning recommendations are suitable is to develop a client profile. Be sure to collect the following information at the beginning of your advisory relationship and to update the profile as your client's situation changes over time:
- Type of client
- Current status
- Financial goals
- Capital and other needs
- Current investments
- Risk tolerance
- Non-financial considerations
As fiduciaries, investment advisers owe their clients a duty to provide only suitable investment advice. The SEC says, "This duty generally requires an investment adviser to determine that the investment advice it gives to a client is suitable for the client, taking into consideration the client's financial situation, investment experience and investment objectives."
Ensuring investments are suitable for a particular client comes into play during the investment recommendations phase of an investment adviser's work. Suitability rules require that investors have the financial means to assume the risks involved with a particular investment.
The exam is likely to pose questions about suitability under different investor scenarios that use the above factors.
Financial AdvisorFinancial advisors must carefully consider a client's willingness and ability to take investment risks, including tax concerns and liquidity needs.
Managing WealthRIAs and brokers are held to different standards when providing investment advice. Here's how they differ.
Financial AdvisorDetermining a client’s risk tolerance is a critical piece of the puzzle in designing and appropriate asset allocation.
Financial AdvisorLosing a client is never pleasant for a financial advisor, but sometimes this is a better outcome than continuing the relationship.
Personal FinanceFiring the clients who take more of your time and effort than the revenue they contribute is a great way to improve your bottom line.
Financial AdvisorFinancial advisors spend a lot of time giving their clients advice on how to invest their money. But what they often forget to do is listen.
Financial AdvisorOne of the best things that advisors can provide to clients is an annual review of their financial situation. Here are some guidelines.
Financial AdvisorAlmost half of millionaires would not recommend their advisor. Here's how to keep these clients happy.
InvestingLearn about the various talking points you should cover when discussing mutual funds with clients and how explaining their benefits can help you close the sale.
Financial AdvisorWhen a major life change such as a job loss comes up the advice and counsel of a trusted financial advisor can prove to be invaluable.