Client Relations Flashcards

An investment adviser registered with the SEC owes clients which duty under the Investment Advisers Act of 1940?

Answer: A fiduciary duty of care and loyalty

The SEC interprets the Advisers Act as imposing a fiduciary duty of care and loyalty on advisers.

Which part of Form ADV is the narrative 'brochure' that advisers give clients?

Answer: Part 2A

Form ADV Part 2A is the plain-English brochure describing services, fees, and conflicts.

A manager receives a client complaint about an unauthorized trade. What is the best first step?

Answer: Document the complaint and escalate it to compliance under firm procedures

Complaints must be recorded and escalated to compliance so they can be investigated and resolved properly.

Which situation is a conflict of interest that must be disclosed to clients?

Answer: The manager receives higher compensation for recommending proprietary funds

Extra compensation tied to particular products creates an incentive that clients need to know about.

An elderly client suddenly asks to wire most of their assets to a new 'friend' met online. What should the manager do?

Answer: Raise concerns with the client, contact the trusted contact person, and escalate per firm policy for possible exploitation

FINRA Rules 4512 and 2165 allow firms to use trusted contacts and temporarily hold disbursements when financial exploitation is suspected.

Why do firms ask clients to name a trusted contact person?

Answer: To have someone to contact about suspected exploitation, health status, or the client's whereabouts

A trusted contact is a resource for protecting the client and has no authority over the account.

Which practice best keeps client trust over the long term?

Answer: Proactive, regular, and transparent communication, including during downturns

Regular, honest communication sets expectations and builds trust in good and bad markets.