An Experimental Investigation of Suitability Assessments
overview
This study seeks to assess the effectiveness of suitability assessments in guiding investors to make informed decisions as well as a tool in identifying vulnerable investors, thereby providing insights crucial for shaping an effective investor protection ecosystem.
In Malaysia, the unit trust industry is supported by approximately 60,000 registered consultants who typically rely on investor self-assessments before making any product recommendations. With the SC’s revised Guidelines on Conduct for Capital Market Intermediaries coming into effect in October 2024, industry needs to put in place policies and procedures to identify and manage vulnerable clients. By comparison, countries such as the US, Australia and Singapore have introduced automated scoring into the suitability assessment process as a more objective approach.
study goals and research questions
- 1
How reliable are investors’ self-reported perceptions of their financial capability, risk tolerance and overall vulnerability?
- 2
Can an objective score help investors better identify their own vulnerabilities and improve decision making?
- 3
Would knowing their score affect investors’ willingness to disclose vulnerability to financial advisers?
Click below to download the research snapshot, or see here for the full report.
