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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 standardised risk profiling questionnaire?

A key limitation is that responses can be distorted by recent market experience or by the client not understanding the questions, so the score may not reflect true risk attitude. Advisers should therefore supplement questionnaires with discussion and cross-checks rather than depend on the score alone.

  1. AIt can never be used for clients above 60 years of age
  2. BResponses may be influenced by recent market conditions and the client's misunderstanding of questions, so results may not reflect true risk attitudeCorrect
  3. CIt is prohibited under the SEBI regulations for investment advisers
  4. DIt measures only the financial capacity and ignores attitudes completely

Explanation

Questionnaires are subject to biases such as recency and to misinterpretation of terms, so answers can be unreliable on their own. Advisers should supplement them with discussion. They are not prohibited; in fact risk profiling is required, and they typically cover attitudes too.

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