Client Data Gathering

Gathering accurate, complete client information is the foundation of the advisory relationship. Before making any recommendation, the adviser must collect sufficient data to understand the client's identity, financial situation, and investment needs.

Client Identification (CIP)

Required by anti-money laundering (AML) regulations and the USA PATRIOT Act Customer Identification Program (CIP). Minimum identification for natural persons:

  1. Name (legal name)
  2. Date of birth
  3. Address (residential street address)
  4. Government-issued ID number (Social Security Number or TIN)

For entities: formation documents, EIN, authorized signers.

Think of it this way: CIP answers "Who are you?" (identity). The full suitability profile answers "What do you need?" (financial picture). Both are required before opening an account.

Exam Tip: Gotchas

  • CIP is an AML/PATRIOT Act identity check, not a suitability profile. Candidates sometimes answer "collect date of birth and address" when asked about suitability; that is CIP. Suitability requires the full financial picture (net worth, income, goals, risk tolerance) on top of CIP.

Questionnaires

  • Standardized forms covering financial situation, goals, risk tolerance, time horizon, and experience
  • Advantages: consistent, documented, efficient for compliance
  • Limitations: clients may not understand questions; responses may not reflect actual behavior under stress

Interviews

  • In-person or virtual conversations to explore nuances that questionnaires miss
  • Allow the adviser to probe inconsistencies (e.g., a client who checks "aggressive" but describes fear of losing money)
  • Best practice: combine questionnaires with interviews for a complete profile

Investment Policy Statement (IPS)

A written document formalizing the results of client profiling. The IPS is the governing document for the advisory relationship. Recommendations must align with it.

IPS components:

  • Client objectives (return requirements, risk tolerance)
  • Constraints (time horizon, liquidity needs, tax considerations, legal/regulatory, unique circumstances)
  • Asset allocation guidelines and permissible ranges
  • Rebalancing policy
  • Benchmark selection
  • Review schedule

The IPS should be reviewed and updated whenever the client's circumstances change materially.

Exam Tip: Gotchas

  • The IPS is a living document, not a one-time exercise. On the exam, if a client's circumstances change (retirement, inheritance, divorce), the correct first step is to REVIEW AND UPDATE the IPS before making any portfolio changes.
  • A recommendation can become unsuitable even if nothing about the investment changed. If a client experiences a major life event and the adviser fails to update the profile and reassess, continuing the prior recommendations is a suitability violation.