Series 7: 10.4.1 Customer Profiles

Taken from our Series 7 Top-off Online Guide

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.

Balance Sheet
Assets
Marketable securities (stocks, ETFs, and mutual funds)	120,000
Cash, CDs, and money market funds	20,000
Treasury securities	60,000
House	400,000
Belongings	10,000
Car	20,000
Total Assets	$630,000

Liabilities
Mortgage	150,000
Utility bills	800
Personal loans	5,000
Total Liabilities	$155,800

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