Client Relations Flashcards
7 cards from real CIM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Client Relations flashcards as text
A new client says they have high risk tolerance but would sell everything after a 10% loss. How should the manager set the portfolio's risk level?
Answer: Weight the lower behavioral risk tolerance and explain the inconsistency to the client
When stated willingness conflicts with likely behavior, managers should go with the more conservative assessment and talk it through with the client.
Which factor mainly determines a client's ABILITY to bear risk, as opposed to their WILLINGNESS?
Answer: Time horizon, wealth relative to needs, and liquidity requirements
Ability to take risk depends on objective financial circumstances such as horizon, asset base, and spending needs.
What is the primary purpose of an Investment Policy Statement (IPS)?
Answer: To document the client's objectives, constraints, and the guidelines for managing the portfolio
The IPS records return and risk objectives, constraints, and the governance of the relationship.
Which of the following is NOT one of the standard IPS constraints?
Answer: Benchmark outperformance target
Standard constraints are liquidity, time horizon, taxes, legal/regulatory, and unique circumstances; a return target is an objective.
A client's spouse calls asking for account balances, but the account is solely in the client's name with no authorization on file. What should the manager do?
Answer: Decline to disclose and get written authorization from the client first
Client confidentiality means account information goes only to authorized parties.
When is the best time to review and possibly update a client's IPS?
Answer: At least annually and whenever the client's circumstances change materially
Regular reviews and reviews after life events keep the IPS matched to the client's current situation.
Under the SEC's Form CRS requirement, what must registered investment advisers and broker-dealers give retail investors?
Answer: A brief relationship summary of services, fees, conflicts, and disciplinary history
Form CRS is a short plain-language summary of the relationship, fees, conflicts, and any legal or disciplinary history.