Suitability Definition

Definition

Suitability is the requirement that a recommendation fit the customer's investment profile, including objectives, risk tolerance, time horizon, liquidity needs, tax status, financial situation, and experience.

Why it matters on the Series 7

Suitability is a reading discipline on the Series 7. Many questions hide the decisive fact in the customer profile, then offer a familiar product that does not actually fit.

Example

A retired customer needing current income and liquidity is usually not a fit for an illiquid speculative product, even if the product has high projected returns.

Common mistakes

• Choosing the product you recognize before reading the customer facts.
• Overweighting return potential and ignoring liquidity or risk tolerance.
• Treating one suitable trade as proof that an excessive trading pattern is suitable.