An Insight into Suitability Practice: Is a Standard Questionnaire the Answer?

For years, financial intermediaries have been focusing on data and information obtained from customers in order to develop and carry out their Customer Relationship Management (CRM) techniques; they have created and improved models that allow them to split customers into homogeneous groups according to some specific drivers (see Channon, 1985; Anderson and Kerr, 2002; Peelen, 2005). Knowing a customer’s characteristics is crucial to intermediaries for two main reasons: from an ex-ante perspective, they can create products and services which can be specifically marketed and sold to particular segments of customers (customer segmentation); ex post, they make use of the information they obtain from clients in order to provide them with products and services that are suitable to their profile, thus reducing complaints and granting a good level of loyalty (customer profiling). In the literature, much effort is devoted to explaining the main drivers of customer segmentation, while the work on customer profiling is less developed. Nonetheless, the profiling process that financial firms follow to sell financial products and services is crucial, as it paves the way for a fiduciary relationship between the customer and the intermediary. Moreover, it has implications in terms of protecting both the investor and the intermediary. In fact, the information that is obtained from the customer in the profiling process is crucial in each step of the contract: a) before the financial service or product is subscribed, in order to meet the preferences and needs of the investors; b) during the contract, in order to acquire any changes in the needs and preferences of the investor; c) after the end of the contract, in order to protect the intermediary against any complaint that the client could make with reference to a loss that he or she did not expect.