| Note: This list should not be interpreted as a total list, and should be supplemented with your
own specific questions tailored to what you know about your client. This list is only a
guideline. |
X
|
| 1. |
Explain to clients the processes you use in developing portfolios and selecting specific
securities. Tailor your explanation to their level of investment sophistication. |
|
| 2. |
Create and maintain a form which has basic information that you will ask of each client,
such as: net worth, occupation, liquid capital, risk capital, investment experience,
investment knowledge, age, dependents, tax rate, income, investment goal, and
investment needs. |
|
| 3. |
Conduct a through interview of your client to obtain all relevant facts and circumstances,
which might affect your recommendations.2 |
|
| 4. |
Make sure that you are aware of all of your client’s other investments so that you can
properly evaluate whether your recommendation is appropriate in conjunction with his
other investments. |
|
| 5. |
Make sure you are aware of your client’s total financial needs and goals and that your
recommendation is matched to these needs and goals. |
|
| 6. |
Make sure that you are aware of your client’s risk tolerance, investment experience, and
investment knowledge so that you can properly evaluate his ability to understand your
recommendations. (See PPC’s How to Measure Risk and Manage Client Expectations for
risk tolerance and investment knowledge surveys.) |
|
| 7. |
Make sure your recommendations take into consideration the issues of diversification,
liquidity, and the risks/reward relationship. |
|
| 8. |
Make sure you document any discussions with your client concerning his needs, any
risks, and your investment game plan (as documented in the investment policy
statement), and keep this information updated. |
|
| 9. |
Consider alternative investments or investment strategies and discuss with your client
why you are recommending one over the other. Distinguish between facts and opinions
when presenting recommendations to the client. |
|
| 10. |
Make sure you know the investment or strategy thoroughly so that you can fully
understand the risks and potential rewards. |
|
| 11. |
Make sure that with each recommendation the client’s interest and needs come first and
that you are not influenced by a conflict of interest such as commissions or fees. |
|
| 12. |
Be aware of any tax ramifications of your recommendations and incorporate them into
your decisions. |
|
| 13. |
Make sure that you fully disclose all the essential and key facts that relate to your
recommendations. |
|
| 14. |
Make sure the client is fully aware and understands the risks and downsides of any
recommendations that you make. Whenever the client is very naive, you should tend to
keep the recommendations more conservative and take extra steps to keep the client
informed. |
|
| 15. |
Evaluate your recommendations and the client’s needs as client circumstances and the
nature of the portfolio dictate, but at least annually. Document your conclusions and
discussions with the client. |
|
| 16. |
Other suitability assessment steps taken:
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Comments:
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