Responsibilities to Clients: Investment Recommendations

Medium Professional Standards Application Responsibilities To Clients

A financial advisor, Lisa, is managing the investment portfolio of her client, a retired individual named Mr. Johnson. Mr. Johnson has expressed a preference for income-generating investments due to his fixed income needs in retirement. Recently, Lisa was approached by a company offering shares in a growth-oriented technology startup that promises high potential returns, but carries significant risk. Although Lisa believes this investment could potentially benefit Mr. Johnson in the long term, it does not align with his current income-focused investment strategy.

Given the CFA Institute's Code of Ethics and Standards of Professional Conduct, which of the following actions should Lisa take in this situation to maintain her responsibilities to Mr. Johnson?

Recommend the technology startup shares to Mr. Johnson, emphasizing the potential for high returns.

Discuss the technology startup investment opportunity with Mr. Johnson, explaining its risks and benefits, but ultimately respect his decision.

Avoid discussing the technology startup opportunity with Mr. Johnson, as it does not align with his income-focused strategy.

Hint

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