CMFAS Financial Advisory Ethics 2

Question 1

What is the balanced scorecard framework for financial advisers?

Accepted Answer

A framework that assesses advisers on multiple criteria including ethics, not just sales

Answer

The balanced scorecard evaluates financial advisers on multiple dimensions including compliance, quality of advice, customer outcomes, and professional development — not just sales volume.

Question 2

What should a financial adviser do if they discover a product is unsuitable for a client after sale?

Accepted Answer

Inform the client promptly and take corrective action

Answer

The adviser must promptly inform the client about the unsuitability and work to rectify the situation, such as recommending a switch or cancellation.

Question 3

What is churning in financial advisory?

Accepted Answer

Excessive trading or switching of products to generate commissions rather than benefit the client

Answer

Churning involves advising clients to make unnecessary trades or switch products primarily to generate commissions for the adviser, not to benefit the client.

Question 4

What is the purpose of continuing professional development (CPD) for financial advisers?

Accepted Answer

To ensure advisers maintain and update their knowledge and skills

Answer

CPD ensures that financial advisers stay current with regulatory changes, market developments, and industry best practices to provide competent advice.

Question 5

What is the responsibility of a financial adviser regarding client confidentiality?

Accepted Answer

Keep all client information confidential unless authorised to disclose or required by law

Answer

Financial advisers must maintain strict confidentiality of all client information and only disclose it with the client's consent or when legally required.

CMFAS Practice Test

CMFAS Practice Test

CMFAS Financial Advisory Ethics 2