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

Which of the following is a limitation of relying only on a standardised risk profiling questionnaire?

A standardised questionnaire gives only a snapshot and may miss changes in the investor's circumstances or behavioural biases unless it is reviewed periodically. It therefore should supplement, not replace, discussion with the client and understanding of their goals.

  1. AIt can never be documented for regulatory purposes
  2. BIt may not capture changes in the investor's circumstances or behavioural biases unless reviewed periodicallyCorrect
  3. CIt always overstates the investor's capacity
  4. DIt removes the need to know the client's financial goals

Explanation

Questionnaires give a point-in-time view and depend on how honestly and consistently the client answers, so they must be revisited as circumstances and attitudes change. They can be documented, and they do not replace understanding goals.

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