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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-reported risk questionnaire to profile a client?

A self-reported questionnaire can give unreliable results because answers are swayed by recent market moves, overconfidence and question framing. Advisers should therefore cross-check the score with a conversation about the client's finances and past behaviour rather than relying on the questionnaire alone.

  1. AResponses can be inconsistent or influenced by recent market conditions and framing of questionsCorrect
  2. BQuestionnaires cannot be used for clients above 50 years of age
  3. CQuestionnaires always overstate the client's risk capacity but never willingness
  4. DRegulations prohibit use of questionnaires without a psychologist

Explanation

Self-reported answers are affected by recency bias, overconfidence and how questions are framed, so results may not be stable. The adviser should supplement them with discussion and financial data. The other options state rules or tendencies that do not exist.

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