A customer asks for growth but needs the money for a home purchase next year. Your recommendation must reconcile both facts before you select a fund.
Your investment profile is the information you use to connect a customer's resources, goals and constraints to a recommendation. Making reasonable efforts means asking useful questions, resolving contradictions and evaluating the answers. A completed questionnaire alone cannot establish that an investment fits.
You cannot service an account safely unless you know who owns the assets, who may give instructions and what special handling the customer needs. The Financial Industry Regulatory Authority (FINRA) therefore requires you to obtain and retain essential facts about customers under Rule 2090. This duty covers account opening and maintenance, even without recommendations. The same facts support compliance with applicable requirements.
Under Rule 2090, essential facts about customers and customer relationships include account registration, which identifies ownership. For example, tenants in common own separate shares, and a deceased owner's share passes through that owner's estate. Verify authority separately.
Common mistakes
- Treating $130,000 of net worth as available cash ignores the six-month payment and emergency reserve.
- Treating $50 million as a Reg BI exemption ignores the personal-use test for a natural person.
- Assuming three suitable funds make three switches suitable ignores cumulative transaction costs.
Bottom line
- Customer profiles include finances, objectives, tax status, experience, time horizon, liquidity needs and risk tolerance.
- Essential account facts must be known and retained even without recommendations.
- Reg BI governs covered retail recommendations and displaces FINRA Rule 2111 and MSRB Rule G-19 suitability.
- Product understanding, customer fit and the combined transaction pattern each require evaluation.
Exam shortcut
Start with the trigger: account maintenance, recommendation, or relationship-summary delivery. Then identify retail personal use or another customer setting. Circle timing and cash constraints before product labels. “Growth,” “experienced” and “wealthy” cannot erase a near-term payment. For repeated trades, add the costs and assess the series. Reject answers claiming customer consent or lack of discretion ends the inquiry.
The full lesson (about 2,847 words, 21 min read) adds 2 worked examples, all 5 common mistakes, a self-check, free in the app.
Learning objectives
- B5
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