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

Which of the following is a recognised limitation of relying only on a self-completed risk profiling questionnaire?

A key limitation is that answers may be swayed by recent market performance and behavioural biases, so the result may not reflect true tolerance. Advisers should therefore supplement questionnaires with discussion and periodic review rather than rely on them alone.

  1. AIt can never be used to document suitability
  2. BAnswers may be influenced by recent market performance and the client's biasesCorrect
  3. CIt cannot capture the client's age
  4. DIt is prohibited under the SEBI Investment Advisers Regulations

Explanation

Clients often answer based on recent market conditions, overconfidence or misunderstanding, so results may not reflect true tolerance. Questionnaires can capture age and are in fact used to document suitability; they are not prohibited.

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