Member States shall require investment firms to ensure and demonstrate that natural persons giving investment advice or information possess necessary knowledge and competence, and shall publish assessment criteria. For investment advice and portfolio management firms must obtain information on clients’ knowledge and experience relevant to the product, financial situation including loss-bearing capacity, and investment objectives including risk tolerance, to recommend suitable services and instruments; bundled packages must be overall suitable. Firms must analyse costs and benefits when advising or managing switches of instruments and inform clients whether benefits exceed costs. For other investment services firms must assess appropriateness by asking clients for relevant knowledge and experience and warn clients if products or services are not appropriate or if insufficient information is provided. Execution-only services may be provided without appropriateness assessment where specified non-complex instruments are involved, the service is client-initiated, the client is clearly informed that no assessment is made, and Article 23 is complied with. Firms must establish records of agreements, provide adequate reports in a durable medium including costs, deliver a suitability statement before transactions (with limited exceptions for distance contracts), and include updated suitability in periodic reports for portfolio management.

Certain mortgage-linked investment services are exempt from these obligations where provision of the investment service is a prerequisite for a residential mortgage under Directive 2014/17/EU. The Commission is empowered to adopt delegated acts to ensure compliance with principles on information, suitability/appropriateness assessment, criteria for non-complex instruments, and reporting formats. ESMA shall publish guidelines by 3 January 2016 on assessment of knowledge and competence and on assessment of complex structured instruments and structured deposits, and may develop guidelines for non-complex classification, with periodic updates.