Recommendations & StrategiesQuestion 59 of 110
An investment adviser recommending a strategy must ensure it is suitable. Which action best supports suitability?
a.Recommending the product paying the highest commission
b.Documenting the client's objectives, risk tolerance, and financial situation before advising
c.Applying the same portfolio to every client for consistency
d.Avoiding any discussion of risk to prevent client anxiety
Explanation
Suitability requires understanding and documenting the client's objectives, risk tolerance, financial situation, and needs before making recommendations. A one-size-fits-all approach or one driven by compensation ignores individual circumstances. As a fiduciary, an adviser must also fully disclose risks.
Practice all 110 questions free — no signup required.
Related questions on this topic
- The Capital Asset Pricing Model (CAPM) expresses the expected return of a security as a function of which of the following?
- Alpha in portfolio performance measurement represents which of the following?
- A client wants current income and capital preservation with low risk. Which allocation is most suitable?
- Which retirement plan feature is characteristic of a defined benefit plan?
- A step-up in cost basis at death generally means which of the following for inherited appreciated securities?
- An efficient frontier graph plots portfolios according to which two dimensions?
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against NASAA Series 65 Investment Adviser Law Exam · How we review