Client Profiling

Client Profiling: Knowing Your Client Before You Recommend Anything Client profiling is one of the most heavily tested practical skills on the Series 65. Expect multiple scenario-based questions that ask you to identify what *additional* information you need, or to evaluate whether a given recommendation is *appropriate* given a described client profile. --- ## Why Client Profiling Matters Before an Investment Adviser Representative (IAR) can make any suitable recommendation, they must first build a complete picture of the client. This process — often called Know Your Client (KYC) — is the foundation of the fiduciary duty of care. An adviser who skips this step and recommends products anyway may be violating their fiduciary obligations, regardless of how good the investment itself might be. --- ## The Six KYC Dimensions NASAA organizes client profiling around six core dimensions. Think of these as the six questions every IAR must be able to answer before recommending anything: | KYC Dimension | What You're Assessing | Practical Example | |---|---|---| | Financial Position | Income, assets, liabilities, net worth | Does the client have $50K or $5M to invest? | | Investment Objectives | Growth, income, capital preservation, speculation | Does the client want to grow wealth or protect it? | | Risk Tolerance | Psychological and financial ability to absorb loss | Can the client sleep at night if the portfolio drops 20%? | | Time Horizon | How long until the client needs the money | Retirement in 30 years vs. buying a house in 2 years | | Liquidity Needs | Accessibility requirements for invested funds | Does the client need $10K available at any time? | | Tax Situation…