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

Related Articles
  1. Financial Advisor

    Manage Your Clients' Expectations

    You can't control how they react to the market, but you can help them understand the reality of the situation.
  2. Financial Advisor

    What To Do When Your Client Behaves Badly

    As a financial advisor managing your client's assets is only part of the job; sometimes you have to manage your client, as well.
  3. Financial Advisor

    Choosing A Financial Advisor: Suitability Vs. Fiduciary Standards

    Discover the differences between the Suitability and Fiduciary Standards when hiring a financial advisor.
  4. Personal Finance

    When (And How) To Fire A Client

    Firing the clients who take more of your time and effort than the revenue they contribute is a great way to improve your bottom line.
  5. Financial Advisor

    Investing Other People's Money: 5 Things You Must Know

    Learn the five things an advisor should know before investing another person's money, with a focus on the FINRA "know your customer" rule.
  6. Managing Wealth

    Asset Manager Ethics: Acting In the Benefit of Clients

    Investment managers should always act to benefit the client. Learn what actions managers should take on a client's behalf.
  7. Tech

    Advisors Need to Talk Less, Ask and Listen More

    Financial 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.
  8. Managing Wealth

    RIAs and Brokers: What's the Difference?

    RIAs and brokers are held to different standards when providing investment advice. Here's how they differ.
  9. Financial Advisor

    How to Construct an Annual Review for Clients

    One of the best things that advisors can provide to clients is an annual review of their financial situation. Here are some guidelines.
  10. Financial Advisor

    How to Handle Your First Meeting with a Client

    Here's what financial advisors should do in an initial client meeting to start off on the right foot.
Frequently Asked Questions
  1. Do interest rates increase during a recession?

    Learn why interest rates do not rise in a recession; in fact, the opposite happens. Identify the factors that reduce interest ...
  2. What is the difference between deflation and disinflation?

    Learn what deflation and disinflation are, how supply and demand affect price levels, and the difference between deflation ...
  3. What rights do all common shareholders have?

    Learn what rights all common shareholders have, and understand the remedies that can be taken if those rights are violated ...
  4. What does CHIPS UID mean?

    Learn what CHIPS UID stands for and how it facilitates the transfer of funds as the back-end of the ACH network for both ...
Trading Center