Suitability

Before recommending an investment, an adviser is expected to understand the client: their age, income, assets, debts, investment goals, time horizon, knowledge of investing and ability to bear losses. Recommendations must then fit this profile.

For example, recommending a complex, high-risk leveraged product to a retired person with limited savings who needs steady income would usually breach suitability requirements.

Suitability rules exist in most countries, although the details differ. In the European Union and the United Kingdom, firms giving advice must carry out a suitability assessment. In the United States, broker-dealers are subject to Regulation Best Interest, which raised the standard above traditional suitability for recommendations to retail customers.

Suitability is a minimum standard. It requires that a recommendation be appropriate, but not necessarily the best available option. A fiduciary duty, which applies to some advisers, is generally stricter, requiring them to put the client's interests first.