In plain English
What Suitability assessment means
Suitability is a broader test than appropriateness. It looks at whether the recommendation makes sense for that client, not just whether the client understands the product. Firms usually need information about income, assets, experience, objectives, and ability to bear losses before making a recommendation.
Why it matters
Suitability is central when a firm gives personal advice, manages a portfolio, or makes a decision to trade for a client. If the assessment is weak or missing, the recommendation may be unsuitable and the firm may face redress, complaints, or supervisory action.
Example
An adviser recommends a leveraged product to a client who says they need low volatility and cannot afford large losses. If the recommendation conflicts with those facts, it may fail the suitability assessment. Simplified example: the adviser must match the product to the client, not just the client to the product.
Quick answers
Common questions
When is a suitability assessment required?+
Typically when a firm gives investment advice, manages investments, or otherwise makes a recommendation or decision to trade for the client under the relevant rules.
Can a suitability assessment be done without client information?+
Usually no. The firm normally needs enough information about the client’s situation and objectives to make a suitable recommendation.
Sources