The Term KYC Stands for “Know Your Customer”. It is a mandatory process by RBI to obtain information about our customers’ identity thereby ensuring that government regulations not misused. This process ensures that clients are not involved in money laundering or the financing of criminal organizations

Same as KYC, Risk profiling is also a mandatory process by SEBI. Risk profiling is a process that professional financial planners use to determine the optimum level of investment risk for investors. Risk profiling helps to identify a client’s level of required risk, their risk capacity, and their tolerance towards risk.

All these three terms may look similar, but they are altogether different from each other. Let us understand.

• Risk Required: This is a risk client need to take to achieve a desire returns from his/her investment
• Risk Capacity: This is a risk that client afford as per their financial condition with his/her age & income.
• Risk Tolerance: Though clients have good risk capacity, but they are not psychologically or Emotionally comfortable with that level of risk.

These both, KYC & Risk Profiling, process help us to understand our customers’ profile. We also understand customers’ behavior and attitude towards investment or trading. As soon as we understand their risk return profile, we can serve them in a better way by suggesting best investment plans to achieve their financial goals. These procedures also help us to keep track of transactions through our advisory, so that we ensure that it does not affect their risk return profile and if so, we can modify the portfolio/plan for smooth achievement of our customers’ financial goals.

Thank You. Happy Investment.

This article is for education purpose only. Kindly consult with your financial advisor before doing any kind of investment.