A Genuinely Different Onboarding Process From Individual Clients
Risk profiling built around individual investor questionnaires — risk tolerance, time horizon, personal financial circumstances — doesn't map cleanly onto a corporate or institutional client. SEBI's framework recognises this with a distinct approach specifically for non-individual clients, built around the client's own governance documentation rather than a personal questionnaire.
The Core Mechanism: The Client's Own Investment Policy
For non-individual clients, risk profiling and suitability assessment is built around the client's board or management-approved investment policy — a formal document the client organisation itself has adopted, setting out its own investment objectives, risk parameters, and permitted asset classes or strategies. The IA's risk-profiling exercise, in this context, is fundamentally about understanding and working within that existing institutional framework, rather than constructing a fresh risk profile from an individual-style questionnaire.
What This Requires From the IA in Practice
Rather than administering a standard questionnaire, onboarding a non-individual client requires obtaining and genuinely reviewing that entity's investment policy document — understanding its stated objectives, constraints, approval hierarchies, and any specific restrictions (sector exclusions, instrument-type limits, concentration caps) that need to shape any advice given, ensuring recommendations are demonstrably consistent with the client's own documented mandate.
What Happens When a Prospective Non-Individual Client Has No Investment Policy
This is a genuinely common scenario, particularly with smaller corporates, trusts, or newer institutional entities that haven't yet formalised an investment policy document. SEBI's framework gives the IA discretion to decline onboarding such a client in the absence of a policy the IA can properly risk-profile against — this isn't a mandatory rejection, but it's an explicitly available, defensible option rather than the IA being forced to onboard a client it genuinely cannot properly risk-assess.
Why This Discretion Matters for Your Own Practice's Risk Management
Onboarding a non-individual client without any documented investment policy, and improvising a risk assessment in its absence, creates real exposure if advice given is later questioned — there's no clear, client-approved benchmark to demonstrate the advice was suitable. Exercising the discretion to decline (or, alternatively, to require the client formalise a basic investment policy before onboarding proceeds) is often the more defensible path.
Helping a Prospective Client Develop a Basic Investment Policy
Rather than simply declining a promising institutional relationship outright, many advisory practices — and this is a genuine value-add service line — help a prospective non-individual client develop a basic, board-approvable investment policy as part of the onboarding process itself, creating the governance foundation the advisory relationship then operates within.
Documentation This Creates for Your Own Compliance File
For every non-individual client, your compliance file should include a copy of (or clear reference to) the client's investment policy, evidence of board/management approval, and a clear documented link between that policy and the specific advice subsequently given — mirroring, in institutional form, the same profile-to-advice traceability individual client files need to demonstrate.
Structuring Non-Individual Client Onboarding Correctly
We help IAs build a proper non-individual client onboarding process — including, where useful, supporting a prospective institutional client in developing the investment policy documentation needed for compliant onboarding to proceed.
Onboarding corporate, trust, or institutional clients and need your non-individual risk-profiling process reviewed or built out properly? Talk to Anuj Desai & Associates.
This article is for general informational purposes and does not constitute regulatory advice specific to any adviser's client onboarding process.