The MiFID II statement of suitability

A MiFID II statement of suitability is the written report a firm must give a retail client before a transaction made on its advice. It sets out the advice and explains how it meets the client’s preferences, objectives and other characteristics. The requirement is in Article 25(6) of MiFID II, and the minimum content is set by Article 54(12) of Delegated Regulation (EU) 2017/565. It is often called a suitability report. It is the visible output of the suitability assessment, and it is usually the first document a supervisor asks to see.

When a statement of suitability is required

A statement is required whenever a firm provides investment advice to a retail client. It must be provided:

• before the transaction is made, and
• on a durable medium, meaning paper or an electronic document the client can store and reproduce unchanged, such as a PDF.

Advice given at a distance

If the client agrees to buy or sell by a means of distance communication that prevents prior delivery, such as a phone call, the firm may send the statement immediately after the client is bound. Two conditions apply. The client must have consented to receiving it without undue delay after the transaction, and the firm must have offered the option of delaying the transaction so the client can receive the statement first.

Portfolio management and ongoing advice

For portfolio management, and for advice where the firm has agreed to assess suitability periodically, the periodic report must contain an updated statement of how the investments meet the client’s preferences, objectives and other characteristics. After the first full report, later reports may cover only the changes in the services or instruments involved and in the client’s circumstances (Article 54(12)).

What the statement must contain

Article 54(12) requires the statement to include:

1. An outline of the advice given. This covers what was recommended, and, where relevant, what the client should sell or hold.
2. How the recommendation suits the client. It must cover how the advice meets the client’s objectives and personal circumstances, with reference to:
   • the investment term required,
   • the client’s knowledge and experience,
   • their attitude to risk and
   • their capacity for loss.
3. Whether the client will need periodic reviews. The firm must point out whether the recommended services or instruments are likely to require the client to seek a periodic review of their arrangements.

Since sustainability preferences became part of the suitability assessment in August 2022, supervisors also expect the statement to explain how the client’s sustainability preferences were taken into account. If the client adapted their preferences because no product matched them, the statement should record that too.

What a good statement adds

The legal minimum is short. In practice, firms that pass supervisory reviews also:

• Personalise every section. They refer to the client’s actual answers, such as “you told us you could bear a loss of up to 25%”, instead of generic category labels.
• Explain disadvantages and risks of the recommendation, not only its benefits.
• Justify switches. When advice involves selling one investment to buy another, they explain why the expected benefits outweigh the costs.
• Address costs. They explain how costs were considered, especially when a costlier or more complex product was chosen over an equivalent one. Detailed figures belong in the separate costs and charges disclosure.
• Write plainly. The statement is for the client, so they avoid legal boilerplate and long disclaimers that bury the explanation.
• Use the client’s language. In cross-border businesses, they deliver the statement in the language the client uses with the firm.

Common weaknesses

• Template text that is identical across clients apart from name and date.
• No link between the client’s risk profile and the specific products recommended.
• Missing capacity-for-loss reasoning.
• Statements generated days after the transaction, without the conditions for distance delivery being met.
• No way to prove which version of the statement the client received.

How Tervan generates the statement of suitability

In Tervan, every answer from the suitability questionnaire can be bound to a template. Paragraphs appear only when they apply. For example, the sustainability section appears only if the client has sustainability preferences. The result is a ready-to-sign PDF/A in the client’s language, with a hash stored for every version.

A flow then takes over. It sends the statement for e-signature, archives a copy and updates your CRM, and every step is logged for record-keeping.

This guide is general information about EU rules, not legal advice. National implementation and your regulator's guidance can add requirements. Check the primary sources linked above before relying on it.