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CFA Level I · CFA Level I Exam · Guidance for Standard III: Duties to Clients

An adviser is reviewing whether a proposed investment is suitable for a client. Under Standard III(C), the adviser should most appropriately judge the investment:

The adviser should judge suitability in the context of the client's total portfolio. Standard III(C) requires considering the investment's impact on portfolio diversity, its risk compared with the client's constraints, and the client's capacity to bear that risk, rather than evaluating it in isolation.

  1. Ain the context of the client's total portfolioCorrect
  2. Bby its stand-alone expected return and volatility
  3. Cagainst the adviser's other clients' holdings

Explanation

Standard III(C) requires members to judge the suitability of investments in the context of the client's total portfolio, including the impact on diversity and whether the client can assume the risk. A stand-alone view ignores this, and other clients' holdings are irrelevant to this client's needs.

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