Financial Advisory Ethics Flashcards

What is the primary duty of a financial adviser to their client?

Answer: To act in the best interest of the client

A financial adviser's primary duty is to act in the best interest of the client, putting the client's needs and objectives ahead of the adviser's own interests.

What is the Financial Advisers Act (FAA)?

Answer: The legislation governing financial advisory services and the sale of investment products in Singapore

The FAA regulates the provision of financial advisory services and the sale of certain investment products in Singapore, including licensing and conduct requirements.

What is a needs analysis in financial advisory?

Answer: A process of understanding a client's financial objectives, situation, and needs

A needs analysis is a systematic process where the adviser gathers information about the client's financial situation, objectives, risk tolerance, and needs to provide suitable recommendations.

Why is disclosure of fees and commissions important?

Answer: It ensures transparency and helps clients make informed decisions

Disclosing fees and commissions ensures transparency, allowing clients to understand the costs and potential conflicts of interest in the adviser's recommendations.

What is the suitability requirement under the FAA?

Answer: The financial adviser must ensure recommendations are suitable for the client's needs and circumstances

The suitability requirement mandates that financial advisers must have a reasonable basis for believing that a recommendation is suitable for the client based on their circumstances.

What constitutes a conflict of interest in financial advisory?

Answer: When the adviser's personal interests conflict with the client's best interests

A conflict of interest arises when the adviser has personal, financial, or other interests that could compromise their ability to act in the client's best interest.