PRODUCT SUITABILITY

 

Process for risk profiling of the client and for assessing suitability of advice

For providing tailored investment advice, our comprehensive process for risk profiling encompasses obtaining essential information from clients. This data helps us in crafting strategies that meet clients' financial goals while aligning with their risk tolerance.

 

Age of the client:

In our risk profiling, we gather information about the age group of the client. Age is a primary factor in determining investment time horizons and risk tolerance.

 

Investment objectives including time for which they wish to stay invested;

We assess whether clients are looking for short-term investment opportunities, which typically involve higher risks, or are interested in long-term investments. Understanding the duration for which clients plan to invest is crucial in aligning our advice with their financial goals.

 

The purposes of the investment;

Determining the purpose behind the investment is key. Clients may aim for capital appreciation, saving for long-term goals, or short-term speculations. Identifying these purposes helps tailor our advice to fit their priorities.

 

Income details of client:

 

We obtain information about their existing investments/assets, whether it requires diversifying their investments Risk- In trading or investment, risk stands for “the loss of capital”. We assume that if a client opens a demat account then he understands the investment in stock market is subject to market risk and he/she is ready to take at least the smaller risk and comes default in low risk category.

 

Risk appetite/ tolerance;

By discussing with the client and analyzing their current assets and liabilities, we determine the client's risk appetite and tolerance level. This step is crucial for providing appropriate investment advice.

 

Liability/borrowing details;

Gathering information about the client’s current liabilities and borrowings helps us assess their capacity to handle financial stress. This insight is vital in understanding how much risk they can realistically assume.

 

Process for assessing the risk a client is willing and able to take:

We use a structured questionnaire to score clients between 1 to 30, which helps in determining their risk category. Based on the scores, clients are classified into one of four risk categories:

 

On the basis of risk category, we have four categories of clients

 

1.   Very High Risk Suitable for aggressive traders willing to accept very high risks. Strategies might include options writing and positional futures, which come with higher risks of market volatility. High Risk – For less aggressive traders ready to take on high risks for potentially higher returns. Strategies include option buying and intraday trading.

 

2.  Moderate Risk -Appropriate for those cautious about high risks but still interested in achieving reasonable returns.

 

3.  Low Risk Best for novice traders or those who prefer a conservative approach to investing. Recommended strategies include bank FDs, post office schemes, and minimal equity trading.

 

 

Product Suitability Table:

 

Category	Risk Score	Product Suitability
Very High Risk	15.5-20	Option writing, FX, Illiquid Stock/Stock Options, Stock Category From D to Z, Category include High, moderate and low risk
High Risk	10.5-15.0	Intraday cash & future. Positional Future, Leverage Trading, Delivery Trading, Naked Option (Buy Side), MCX Trading, Category include moderate & low risk
Moderate Risk	5.0-10.0	Intraday Cash , Delivery Trading & option strategies, category include low risk
Low Risk	0.5-4.5	Pure cash trading (least quantity), Delivery trading (least quantity), option strategy, Bank FD, Post office scheme

 

 

 

Risk assessment is done based on the information provided by the client to the IA. The IA does not cross-check the information and believes the information provided by the client.