Know Your Client - KYC

Brokers and investment advisers are legally obligated to know their client.

That doesn't mean they know how a client takes their coffee, or what they really think of the GOAT. It means that they understand the client's goals, financial situation, and comfort levels when it comes to risk. Knowing this stuff lets the pros make good investment decisions on behalf of the client, and lets them offer the right advice.

Like...you have a 26-year-old who just inherited a million bucks from old Uncle Larry. They're just finishing their doctoral dissertation in Computer Science. There will be a line around the block of employers courting them. They have no debt, and really don't want to own much of anything other than a nice computer. So that million bucks likely gets steered into lots of small company investments which likely pay no or small dividends. And are expected to grow a lot over the next decades.

However, if you knew that this client was scared of his own shadow, always thought that the sky was falling, and just didn't want stock market volatility anywhere in his life...well, then maybe you'd put half of his portfolio in bonds or some safer, saner equity investment that paid a fat dividend.

Knowing your client changes...everything (sometimes).