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

The fiduciary duty of RIAs consists of the duty of care (act in client's best interest) and duty of loyalty (put client's interests first, disclose conflicts).

Question 2

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

Accepted Answer

Client's neighbor's investment strategy

Answer

A client's neighbor's investment strategy is irrelevant to suitability—each client's situation must be evaluated individually.

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

KYC requires advisers to gather comprehensive information about clients to provide suitable, appropriate investment advice.

Question 4

An investment recommendation is suitable when it:

Accepted Answer

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

Answer

Suitability requires that recommendations match the individual client's investment profile, including objectives, risk tolerance, and financial situation.

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

For a client with long time horizon and high risk tolerance, a growth-oriented diversified portfolio is consistent with fiduciary duty and suitability.

(RIA) Registered Investment Advisor Practice Test

(RIA) Registered Investment Advisor Practice Test

RIA Client Suitability & Fiduciary Duty