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Article | MPFexpress

Making good use of suitability assessments helps members make investment decisions

By Elaine Hwang and William Chow | December 1, 2023

Understand how suitability assessments ensure that the recommended funds align with the member's investment needs. This article in English and Chinese is available for download.

Some Mandatory Provident Fund (MPF) members rely on the advice provided by MPF intermediaries (brokers or agents) when making investment decisions. According to the guidelines on the conduct of registered intermediaries, when intermediaries provide advice on whether members should invest in a particular constituent fund, it is considered “regulated advice”. In such cases, intermediaries need to conduct a suitability assessment to understand a member’s risk tolerance level and investment objectives, ensuring that their recommended funds are suitable for the member and safeguarding their interests.

Questionnaire to collect a member's risk profile

During the suitability assessment process, the intermediary needs to gather information about the member's personal circumstances, such as age, expected retirement age, financial situation, investment goals, investment knowledge, investment experience, and risk tolerance, etc. The Intermediary will use a questionnaire to collect this information and will assign a score to each question and provide advice based on the member's overall score within the relevant fund risk category.

Scores reflect only the risk level

Each question in the suitability assessment reflects the member's risk level. Generally, younger members and those with a longer time until retirement will receive higher scores. Members with extensive investment experience and a higher tolerance for capital loss will also receive higher scores. The suitability assessment is not an exam, and a higher score does not necessarily indicate better investment skills. A higher score typically suggests that a member will be more comfortable with higher risk funds, while a lower score suggests that lower-risk funds may be more suitable.

Members can still invest according to their own preferences

When completing the suitability assessment questionnaire, members should provide truthful answers to obtain an accurate assessment of their risk tolerance. While we recommend that members choose funds based on their risk tolerance as indicated by the suitability assessment, members ultimately have the final decision-making authority when it comes to investment decisions. Even if there is a discrepancy between the investment decision and the suitability assessment, as long as the intermediary has explained the risks of the chosen fund when providing advice, members can still proceed with their personal investment preferences.

Regular updates of suitability assessments

It should be noted that suitability assessments only apply when intermediaries provide advice on fund selection. If intermediaries only provide advice on the MPF scheme itself (e.g., transferring benefits to another trustee scheme), there is no need for such assessments. If members have undergone suitability assessments for other investment products in the past and the assessment was conducted recently, including the required information, and the intermediary has reason to believe that the member's personal circumstances have not changed, the same suitability assessment can be used. Since members' personal circumstances can change over time, and their risk tolerance may also change, we recommend that members regularly review their investment portfolios and update the suitability assessment to ensure that their selected funds continue to align with their risk tolerance levels. In fact, some MPF service providers have free investment assessment tools on their websites. Members may conduct a self-assessment in order to understand their personal situation better.


Senior Director & Business Development Lead, Greater China

Head of Retirement, Hong Kong & Macau

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