Series 7: 10.4.1 Customer Profiles

10.4.1  Customer Profiles

But regardless of your approach, this is where you should start. We saw in the last chapter the importance of a company’s income statement, balance sheet, and cash flow statement in evaluating an issuer’s securities. The same holds true in evaluating the investment possibilities of the individual customer.

Broker-dealers cannot open an account for a new customer until they have completed a suitability analysis based on the customer’s personal and investment profile. Only after a suitability analysis has been approved can the broker-dealer work up an investment strategy for the customer and recommend transactions.

Just like a business, an individual’s financial situation may be analyzed by understanding his/her balance sheet and income statements. Let’s look at Tricia’s financial statements.