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

Which of the following is the most likely weakness of a risk profiling questionnaire that relies only on self-reported answers?

The main weakness is that clients may respond inconsistently or be swayed by recent market sentiment, overconfidence or misunderstanding, so the score may not reflect real behaviour in a downturn. Advisers therefore validate it through discussion and other information.

  1. AIt always overstates the client's net worth
  2. BClients may answer inconsistently or based on recent market sentiment, so the score may not reflect true behaviourCorrect
  3. CIt cannot be used for clients above 60 years of age
  4. DIt removes the need to know the client's goals

Explanation

Self-reported answers are affected by recent market conditions, overconfidence and poor understanding of the questions, so results can be inconsistent. The questionnaire has no inherent age limit, does not systematically inflate net worth and does not replace goal analysis.

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