Series 65

By Investopedia AAA

Analyzing Your Client's Financial Profile - Introduction

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:

  1. Type of client
  2. Current status
  3. Financial goals
  4. Capital and other needs
  5. Current investments
  6. Risk tolerance
  7. 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.

Client Type
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