Suitability assessment
When managing an individual portfolio or providing investment advice, an investment firm should undertake a suitability assessment. This involves the investment firm obtaining relevant information from the client and taking this information into account before providing investment advice or managing an individual portfolio. This ensures that a client can be confident that they are receiving suitable investment advice or suitable portfolio management services for them. Any SRI preferences should also be taken into account.
In addition, whenever providing investment advice, an investment firm must each time issue a written statement on suitability to a client. In this report, the investment firm must explain why it believes that the advice is suitable based on the client information that was obtained. In the case of portfolio management, this report can be provided at regular intervals.
Also, when providing investment advice, an investment firm must clearly indicate whether a suitability assessment is performed at regular intervals with regard to the existing portfolio.
ESMA has prepared Guidelines for this topic, which can be found in the document Guidelines on certain aspects of the MiFID suitability requirements. ESMA has also prepared Q&As for this topic, which can be found in the document ESMA Q&As Investor Protection (Chapter 2).