Risk Profiling and suitability assessment

 Risk Profiling and suitability assessment

According to SEBI , investment advisors should conduct a risk profiling of clients whenever a recommendation is given to a client to purchase a financial product. 

Such recommendation or advice is based upon a reasonable assessment that the structure and risk-reward profile of the financial product are consistent with client’s experience, knowledge, investment objectives, risk appetite and capacity for absorbing the loss.

Taking a risk profile is a complex process.When a client approaches an advisory, he will undergo thorough financial analysis to find out the risk tolerance level. After finding the risk taking capacity of an individual advisory suggests a composition of assets to achieve his specific future goals. This will be done by the help of software. After this process, a financial planning report can be made and sent to the client.

How to Excella software for risk profiling?

Excella is providing tools to financial planners and investment advisors. Excella advanced financial planning software helps an advisor to do all kinds of financial analysis, Goal Tracking , Risk profiling, Goal Planning, Re balancing , Scenario analysis etc.Analysis of portfolio involves all assets like stocks, Bonds, Commodities, Indexes, derivatives etc. So this involves a lot of historical data gathering done through an advanced system.

Risk distribution into different asset classes is a difficult task if it is done manually. Investment firms normally depend on software tools to do this job.If your portfolio is carefully constructed based on your risk tolerance level then the next step is to track the portfolio from time to time. Re-balancing is a procedure where you are adjusting it with different circumstances. This is done automatically using software.

Maintaining of records

Advisory shall maintain certain records, which includes 

1. KYC records of the client
2. Risk profiling and risk assessment of the client
3. Suitability assessment of the advice being provided
4. Copies of agreements with clients 
5. Investment advice provided, whether written or oral
6. Rationale for arriving at investment advice
7. Register or record containing a list of the clients
8. The date of advice and nature of the advice
9. The products/securities in which advice was rendered and fee, if any charged for such advice. 

These are important documents that are considered by the auditor at the time of compliance audit. IA shall keep these records ready for the audit. The Auditor shall verify the records during the compliance audit.

Get Excella complete onboarding system to do above process - Call 9605995500