25 years: Wealth and risk management specialist
In this video, Faisal discussed the two types of assessment that advisors working in this space are required to carry out, namely the "suitability test" and the "appropriateness test." He also explained the circumstances in which these tests apply and how exactly they are performed.
In this video, Faisal discussed the two types of assessment that advisors working in this space are required to carry out, namely the "suitability test" and the "appropriateness test." He also explained the circumstances in which these tests apply and how exactly they are performed.
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9 mins 12 secs
For a wealth manager to be able to give investment advice to a client, the client has to undergo suitability and appropriateness assessments first. Suitability requirements include checking the client's knowledge and experience, their financial situation, and their objectives. Appropriateness requirements also includes understanding the client's relevant knowledge and experience in certain financial instruments. Their past performance enables the wealth manager to judge whether the financial services and instruments envisaged for the client are appropriate for them.
Key learning objectives:
Understand the Suitability Assessment requirements and how is it performed
Understand the Appropriateness Assessment requirements and how is it performed
Understand the Investment Advice record keeping requirements for Wealth Management firms
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Wealth managers must assess if the financial instrument or service is “appropriate” for the client in the case of complex products defined as anything other than equities, bonds and money market funds
The firm will assess the individual client’s relevant knowledge of and experience in financial instruments, including:
If the service provided is an execution-only service, then the appropriateness test is deemed to be unnecessary provided that the following conditions are met:
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