Skip to content

NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Comparison of Products Across Categories

Which of the following is a key reason an investment adviser should compare products on a like-for-like basis (post-tax, after costs, over the same horizon) before recommending them?

Advisers compare products post-tax, after costs and over the same horizon because tax treatment, charges, liquidity and risk differ, so a product with the higher headline return may actually leave the client worse off. Like-for-like comparison supports suitable advice.

  1. AHeadline returns of different products are always directly comparable
  2. BDifferences in taxation, costs, liquidity and risk can make a product with the higher headline return inferior for the clientCorrect
  3. COnly the product with the lowest cost should ever be recommended
  4. DPost-tax comparison is relevant only for debt products

Explanation

Taxes, charges, liquidity and risk vary across products, so headline returns can mislead. Comparing after tax and costs over the same horizon gives a fair basis. Lowest cost alone is not the criterion, and tax matters across product categories, not only debt.

Did you get it right without looking?

One question tells you little. A timed set on Comparison of Products Across Categories shows your real accuracy, how long you take and where you lose marks.

Practise Comparison of Products Across CategoriesFree diagnostic mock

More Comparison of Products Across Categories questions