Suitability assessment
Financial institutions such as investment firms, banks and insurance advisers have to perform the suitability assessment when providing investment advice or in managing portfolios. This ensures that investments match a customer’s personal situation, objectives and sustainability preferences. Since 2022, there are specific requirements on how companies query sustainability preferences.
The purpose of the suitability assessment in relation to sustainability preferences is to ensure that investments align with customers’ sustainability wishes. Financial institutions have to actively inquire after customers’ sustainability preferences and include these in their investment advice or portfolio management. Careful and thorough queries of sustainability preferences are important, as they serve as the basis for determining the suitability of an investment and preventing any mismatch.
To whom does the suitability assessment apply?
- To investment firms and banks (MiFID II)
- To advisers of insurances with an investment component (IDD).
What does the AFM expect from market participants?
Listed below are the main expectations for 2025 and 2026:
• They provide an understandable explanation of the element of sustainability in the suitability assessment.
• They are thorough in the collection of information about the actual sustainability preferences and do not steer investors towards a particular product or investment strategy.
• They provide investors with suitable products, matching their actual/initial sustainability preferences to the extent possible. They will not steer towards adjusting these preferences.