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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Risk Profiling for Investors

A risk profiling questionnaire scores a client on seven questions. Which design flaw would most weaken its reliability for deriving a risk profile?

Leading questions that nudge clients toward a socially preferred answer most weaken a questionnaire's reliability, because responses then reflect perceived expectations rather than true attitudes. Covering experience and loss reactions, scenario questions and periodic review are all sound practices in risk profiling.

  1. AUsing questions on both investment experience and loss reactions
  2. BIncluding a scenario of a market fall
  3. CAsking leading questions that suggest a socially preferred answerCorrect
  4. DReviewing the profile periodically

Explanation

Leading questions bias answers toward what appears desirable, so the score does not reflect the true attitude. The other options are accepted good practices: covering several dimensions, scenario questions, and periodic review.

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