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
Which scenario illustrates an undisclosed conflict of interest that would violate fiduciary standards for a retirement planner?
Answer: Recommending a mutual fund in which the advisor holds a personal investment without disclosing this fact
Recommending a security in which the advisor has an undisclosed personal financial interest is a clear conflict of interest that must be disclosed.
Under DOL fiduciary rules, when must a retirement advisor providing rollover recommendations act in the client's best interest?
Answer: Whenever providing rollover advice regardless of whether assets are currently in an ERISA plan
DOL fiduciary rules require best-interest conduct whenever providing rollover advice, including recommendations to move assets from a plan to an IRA.
A CRPC designee advises a client to consolidate multiple retirement accounts into a single IRA managed by the advisor's firm. What disclosure obligation exists?
Answer: The advisor must disclose any compensation received as a result of the consolidation
Any compensation the advisor or firm receives as a result of a rollover or consolidation recommendation must be fully disclosed to the client.
Which of the following is the most appropriate response when a CRPC designee realizes they lack sufficient expertise in a specialized area relevant to a client's retirement plan?
Answer: Refer the client to a qualified specialist or collaborate with one
The duty of competence requires advisors to either develop the necessary expertise or refer clients to qualified specialists when a specialized area is outside their knowledge.
A retirement planner learns that a 78-year-old client has recently changed their beneficiary to a new acquaintance and made several large withdrawals. What is the appropriate action?
Answer: Document the observations and consider reporting suspected financial exploitation to the appropriate authorities
Unusual financial activity in elderly clients may indicate exploitation, and advisors have an ethical — and in many states legal — obligation to document and report such concerns.
The fiduciary duty of care in retirement planning specifically requires that an advisor:
Answer: Act with the competence and diligence that a reasonable professional would exercise
The duty of care requires advisors to bring reasonable professional competence and diligence to every client engagement.
A CRPC designee is offered a large referral fee from a long-term care insurance provider for each client enrolled. How should this be handled ethically?
Answer: Disclose the referral fee arrangement fully to clients before recommending the insurance
Referral fees create conflicts of interest that must be fully disclosed so clients can evaluate whether the recommendation is truly in their best interest.