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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 standard risk profiling questionnaire?

A questionnaire records the client's stated attitude at a single point in time, and responses can swing with recent market conditions, wording or misunderstanding. Advisers therefore supplement it with conversation and periodic reviews, and still need to understand goals and finances separately.

  1. AIt can never be used for documentation under regulations
  2. BIt may capture stated attitudes at one point in time, which can change with market conditionsCorrect
  3. CIt always overstates the client's financial capacity
  4. DIt removes the need to know the client's goals

Explanation

Questionnaires reflect responses at a given moment and can be influenced by recent market events, wording and the client's understanding. Therefore advisers supplement them with discussion and periodic review. They do not replace goal analysis, and they do not systematically overstate capacity.

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