NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Ethical Issues
Which of the following is the best example of an adviser maintaining objectivity when preparing a client's financial plan?
The adviser should use realistic, documented assumptions and show the client how outcomes change if those assumptions change. This keeps the advice objective and transparent, while optimistic assumptions, omitted fees or imposing the adviser's own risk appetite would mislead the client.
- AUsing only assumptions that make the plan look achievable so the client stays motivated
- BUsing realistic, documented assumptions and showing the client the sensitivity of outcomes to changesCorrect
- CLeaving out fees to make the plan appear simpler
- DBasing the plan on the adviser's own risk appetite
Explanation
Objectivity requires realistic and transparent assumptions and honest presentation of uncertainty. Optimistic assumptions, hiding fees or using the adviser's own risk appetite all distort the advice and fail the client.
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