Suitability
Suitability Assessment
Definition
The assessment firms must conduct when providing investment advice or portfolio management to ensure that recommendations are suitable for the client based on their knowledge and experience, financial situation, investment objectives, and risk tolerance. Suitability is a higher standard than appropriateness and requires firms to gather comprehensive client information.
Regulatory Context
Suitability requirements under MiFID II have been enhanced to include consideration of sustainability preferences. ESMA guidelines provide detailed expectations on how firms should conduct suitability assessments and document the basis for their recommendations.