Ethical and Fiduciary Duties Flashcards
7 cards from real CRPC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Ethical and Fiduciary Duties flashcards as text
A CRPC designee discovers that a client's current annuity generates high commissions but is unsuitable for the client's retirement income needs. What is the fiduciary obligation?
Answer: Recommend replacing it with a more suitable product even if the commission is lower
The fiduciary duty requires putting the client's interests first, including recommending products that better serve retirement needs even at lower compensation.
Under the NACADA Code of Ethics, which action best demonstrates the duty of loyalty to a retirement planning client?
Answer: Avoiding any action that benefits the advisor at the client's expense
The duty of loyalty requires that the advisor place the client's interests above their own and avoid self-dealing.
A retirement planner recommends a variable annuity to a 72-year-old client with a 10-year surrender period primarily because it offers a guaranteed lifetime income rider. What ethical concern is raised?
Answer: The surrender period may outlast the client's realistic planning horizon
A 10-year surrender period on a variable annuity for a 72-year-old raises suitability concerns since the client may need liquidity before the surrender period ends.
Which of the following represents a violation of the confidentiality duty owed by a CRPC designee?
Answer: Disclosing a client's account balances to the client's adult child without written authorization
Disclosing a client's financial information to a third party, including family members, without proper written authorization violates the duty of confidentiality.
A CRPC designee provides retirement planning services and also sells insurance products. Which practice best manages the resulting conflict of interest?
Answer: Disclosing the dual role and compensation structure fully in writing before providing recommendations
Full written disclosure of the dual role and how compensation is earned allows the client to make an informed decision about the advice they receive.
What does the 'prudent investor' standard require of a fiduciary managing retirement assets?
Answer: Investing with the care, skill, and diligence of a knowledgeable person managing similar assets
The prudent investor rule requires fiduciaries to act with the skill and diligence that a knowledgeable investor would use, considering risk and return objectives.
A client asks a CRPC designee to recommend a specific mutual fund that the designee knows is underperforming relative to its peers. What is the ethical course of action?
Answer: Recommend a more suitable fund and explain the performance data to the client
The fiduciary duty requires recommending suitable options and providing accurate information so the client can make an informed decision.