Series 7: 10.4.1. Customer Profiles

Taken from our Series 7 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.

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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