CMFAS Financial Advisory Ethics 1

Question 1

What is the primary duty of a financial adviser to their client?

Accepted Answer

To act in the best interest of the client

Answer

A financial adviser's primary duty is to act in the best interest of the client, putting the client's needs and objectives ahead of the adviser's own interests.

Question 2

What is the Financial Advisers Act (FAA)?

Accepted Answer

The legislation governing financial advisory services and the sale of investment products in Singapore

Answer

The FAA regulates the provision of financial advisory services and the sale of certain investment products in Singapore, including licensing and conduct requirements.

Question 3

What is a needs analysis in financial advisory?

Accepted Answer

A process of understanding a client's financial objectives, situation, and needs

Answer

A needs analysis is a systematic process where the adviser gathers information about the client's financial situation, objectives, risk tolerance, and needs to provide suitable recommendations.

Question 4

Why is disclosure of fees and commissions important?

Accepted Answer

It ensures transparency and helps clients make informed decisions

Answer

Disclosing fees and commissions ensures transparency, allowing clients to understand the costs and potential conflicts of interest in the adviser's recommendations.

Question 5

What is the suitability requirement under the FAA?

Accepted Answer

The financial adviser must ensure recommendations are suitable for the client's needs and circumstances

Answer

The suitability requirement mandates that financial advisers must have a reasonable basis for believing that a recommendation is suitable for the client based on their circumstances.

CMFAS Practice Test

CMFAS Practice Test

CMFAS Financial Advisory Ethics 1