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

While preparing a comprehensive financial plan for a new client, an investment adviser finds that the client's stated goals conflict with the client's risk tolerance. What is the most appropriate first step?

The adviser should discuss the conflict with the client, explain the trade-offs, and document the revised or prioritised goals. Suitability requires respecting the risk profile, and the client must take informed decisions rather than having goals or risk limits ignored or altered silently.

  1. ADiscuss the conflict with the client, explain the trade-offs, and document the revised or prioritised goalsCorrect
  2. BIncrease the equity allocation so that the stated goals can be met regardless of risk tolerance
  3. CProceed with the stated goals and note the risk profile only in the internal file
  4. DDrop the goals that conflict with risk tolerance without informing the client

Explanation

An adviser must act in the client's interest and ensure suitability. Conflicts between goals and risk capacity or tolerance must be discussed openly with the client, and the resulting decision documented. Overriding the risk profile or silently dropping goals breaches suitability and transparency.

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