Skip to content

NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Case Studies in Comprehensive Financial Advice

Caselet: A client with a low risk tolerance but a high need to achieve a return that requires aggressive investing asks the adviser to take a high-equity portfolio. Which approach best reflects the adviser's duty under suitability principles?

The adviser should recommend a portfolio that fits the client's risk tolerance and discuss revising goals, time horizon or savings to close the return gap. Suitability cannot be sacrificed for the return need, and the mismatch should be documented transparently.

  1. ARecommend a portfolio matching risk tolerance and discuss revising goals, timeline or savings to bridge the gapCorrect
  2. BFollow the return need and ignore risk tolerance
  3. CRecommend the highest-commission product for the goal
  4. DAvoid documenting the mismatch to keep the client comfortable

Explanation

Suitability requires the portfolio to fit the lower of risk capacity and tolerance. When the required return exceeds what that risk allows, the adviser should explain the gap and suggest adjusting goals, time horizon or savings. Ignoring tolerance, favouring commission or hiding the mismatch breaches duty.

Did you get it right without looking?

One question tells you little. A timed set on Case Studies in Comprehensive Financial Advice shows your real accuracy, how long you take and where you lose marks.

Practise Case Studies in Comprehensive Financial AdviceFree diagnostic mock

More Case Studies in Comprehensive Financial Advice questions