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 client keeps holding a losing stock and says they will sell 'once it gets back to what I paid.' Which bias is this?
Answer: Disposition effect / loss aversion
Holding losers to avoid locking in a loss is the disposition effect, which comes from loss aversion.
Which approach usually works best with a client who shows strong anchoring bias?
Answer: Reframe decisions around current fundamentals and forward-looking expectations
Moving the client's attention from a historical reference price to current information reduces anchoring.
According to behavioral finance guidance, which kind of bias should managers generally adapt to rather than try to correct, especially for wealthy clients?
Answer: Emotional biases such as loss aversion
Emotional biases are hard to change, so managers often adapt to them, especially when the client's wealth gives them room to.
A client asks the manager to guarantee that the portfolio will not lose money this year. What is the appropriate response?
Answer: Explain that returns can't be guaranteed and discuss risk-appropriate strategies
Guaranteeing investment results is misleading and generally prohibited; managers must communicate risk honestly.
Which is the most effective way to report performance to clients?
Answer: Show returns against an appropriate benchmark and the client's IPS objectives, net of fees
Fair reporting compares net-of-fee results with relevant benchmarks and the client's stated goals.
Under Regulation Best Interest, a broker-dealer making a recommendation to a retail customer must meet which obligations?
Answer: Disclosure, care, conflict of interest, and compliance obligations
Reg BI's general obligation is met through disclosure, care, conflict-of-interest, and compliance components.
A client keeps calling during market volatility asking to move entirely to cash. What should the manager do first?
Answer: Revisit the client's IPS, goals, and time horizon, and explain the risks of market timing
Going back to the agreed plan and long-term objectives helps prevent emotionally driven decisions while respecting the client's authority.