Working with Retail Clients Flashcards
7 cards from real CSC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Working with Retail Clients flashcards as text
A retail client instructs their advisor to purchase a highly speculative investment that conflicts with their documented risk tolerance. What should the advisor do?
Answer: Document the client's instruction, inform them of the conflict, and execute only if the client insists in writing
Advisors must document client instructions that conflict with their profile, inform the client of the mismatch, and may execute if the client insists but should note the override in writing.
Under the 'Know Your Client' (KYC) obligations, which of the following is NOT typically required information?
Answer: Client's employment history for the past 10 years
KYC requires investment objectives, risk tolerance, time horizon, and financial situation, but does not require a detailed 10-year employment history.
A client wants to open a joint account with their spouse. Which statement about joint accounts is correct?
Answer: Both account holders must provide KYC information
Both joint account holders must complete KYC requirements since the suitability obligation applies to each person on the account.
What is the primary purpose of a client's Investment Policy Statement (IPS)?
Answer: To document the client's investment goals, constraints, and guidelines for portfolio management
An IPS formally documents the client's investment objectives, risk tolerance, time horizon, and constraints to guide portfolio management decisions.
A senior client shows signs of cognitive decline. What is the advisor's most appropriate course of action?
Answer: Escalate concerns to a supervisor and consider involving a trusted contact person
Advisors should escalate concerns about client vulnerability to supervisors and may reach out to a trusted contact person previously identified by the client.
Which best describes the 'time horizon' component of a KYC assessment?
Answer: The period over which the client expects to hold investments before needing the funds
Time horizon refers to how long the client intends to keep money invested before needing access, which significantly influences appropriate asset allocation.
A client claims they have a very high risk tolerance on a questionnaire but their financial situation shows heavy debt and minimal liquid savings. How should the advisor reconcile this?
Answer: Use the lower of the stated tolerance and what the financial situation supports
Advisors must assess risk capacity (ability to absorb losses) alongside risk tolerance (willingness to take risk) and use the more conservative result.