10.4.1. Customer ProfilesBut 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
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