RIA Client Suitability & Fiduciary Duty

Question 1

A registered investment adviser's fiduciary duty includes which two primary components?

Accepted Answer

Duty of care and duty of loyalty

Answer

Duty to invest and duty to report

Answer

Duty to diversify and duty to communicate

Answer

Duty to register and duty to disclose fees

Question 2

When gathering information for a client suitability assessment, which factor is LEAST relevant?

Accepted Answer

Client's neighbor's investment strategy

Answer

Investment time horizon

Answer

Risk tolerance

Answer

Tax situation

Question 3

The 'know your customer' (KYC) principle requires investment advisers to:

Accepted Answer

Gather sufficient information to understand clients' financial situations and needs

Answer

Verify customer credit scores only

Answer

Meet clients in person annually

Answer

Obtain government identification only

Question 4

An investment recommendation is suitable when it:

Accepted Answer

Aligns with the client's investment profile, objectives, and risk tolerance

Answer

Generates the highest possible commission

Answer

Is consistent with current market trends

Answer

Is approved by FINRA

Question 5

A client has a 30-year time horizon and high risk tolerance. Under the fiduciary standard, the adviser should:

Accepted Answer

Recommend a diversified portfolio weighted toward growth assets

Answer

Recommend only Treasury bonds for safety

Answer

Recommend whatever generates the highest fee

Answer

Recommend the adviser's proprietary products exclusively

Question 6

Client profiles must be updated when:

Accepted Answer

There are significant changes in client circumstances, goals, or risk tolerance

Answer

The stock market rises 10%

Answer

The adviser changes firms

Answer

Interest rates change