IAR Client Investment Recommendations & Strategies 2

Question 1

A 58-year-old client with a moderate risk tolerance wants to retire in 7 years. Which portfolio allocation is most appropriate?

Accepted Answer

60% equities, 40% fixed income with gradual de-risking

Answer

A balanced 60/40 portfolio with a glide path toward less equity exposure aligns with a moderate-risk, near-retirement investor's goals.

Question 2

When evaluating suitability for options trading, an IAR must primarily consider which factor?

Accepted Answer

The client's financial sophistication and risk capacity

Answer

Options are complex, leveraged instruments, so the client's ability to understand and financially absorb losses is the primary suitability concern.

Question 3

A client asks an IAR to recommend a strategy that generates regular income while limiting downside risk. Which strategy best fits?

Accepted Answer

Covered call writing on existing stock holdings

Answer

Covered calls generate premium income and provide partial downside offset, making them suitable for income-seeking clients with existing equity positions.

Question 4

Which of the following best describes dollar-cost averaging as an investment strategy?

Accepted Answer

Investing a fixed dollar amount at regular intervals regardless of price

Answer

Dollar-cost averaging involves investing a fixed amount at set intervals, which reduces the impact of volatility by purchasing more shares when prices are low.

Question 5

A client has a very high risk tolerance but a short 2-year time horizon. How should an IAR handle this conflict?

Accepted Answer

Prioritize the short time horizon and recommend lower-volatility assets

Answer

When risk tolerance and time horizon conflict, the shorter time horizon typically takes precedence because volatility can cause permanent loss before recovery is possible.

IAR Practice Test

IAR Practice Test

IAR Client Investment Recommendations & Strategies 2