Suitability and appropriateness

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In the pantheon of conduct regulation, suitability and appropriateness are two tests one must do on clients to understand whether a product you propose to sell it is, well “suitable”, and “appropriate”, for that client.

Appropriateness
/əˈprəʊpriətnəs/ (n.)
Appropriateness is an assessment of expertise: if a client has sufficient knowledge and experience of the product or service in question, it will be “appropriate” for that client. It applies to a wide range of clients and activities that are “non-advised” — including simple receipt and transmission of orders for “complex” products, though professional clients are deemed to have expertise.

Suitability
/ˌsuːtəˈbɪləti/ (n.)
Suitability is a more comprehensive assessment of the client’s financial situation, investment objectives, knowledge and experience and risk tolerance, but it only applies to investment advice and portfolio management services.

See also

• FCA handbook on appropriateness (as of August 2024)
• FCA handbook on suitability (as of August 2024)