How should your client’s knowledge and experience affect the type of investments you offer?

Knowledge and Experience help determine the level of understanding the client has on the typical investment formats available.

Gillan Williams
Author Gillan Williams
Date 18th August 2016

The Knowledge and Experience assessment comes in the standard format of 3 questions during the profiling process. They help determine the level of understanding the client has on the typical investment solutions available.

Their responses will place them in a K&E category ranging from 1 to 4, which has been calibrated to be discriminative on a relative scale of UK investors. The examples of the types of investment asked can be altered by the advisor firm, to provide a more intuitive set of options. Oxford Risk will then calibrate those choices using data accumulated over the past 8 years.

This can be useful for determining whether the client is suitable for your services or provide a ‘knock out’ function (screen for those who shouldn’t be investing in the kind of instruments you provide). Some advisory firms do not service ‘first time’ investors; by ascertaining the level of their investment knowledge and experience, you can more quickly understand their suitability and satisfy regulatory hurdles.

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