Ethical Decision-Making in Client Investment

Hard Professional Standards Application Ethical Decision-making

Mark Donovan is a Chartered Financial Analyst (CFA) who works as an investment advisor for a prominent wealth management firm. Recently, he encountered a situation where a long-standing client, Mrs. Alice Green, expressed a desire to invest a significant amount of her retirement savings in a high-risk investment fund that Mark has been wary of due to its poor historical performance and lack of diversification.

Mark knows that Mrs. Green is approaching retirement age and has a risk-averse profile based on prior discussions. However, he also feels pressured by his firm to increase the firm’s assets under management and bolster their performance metrics. That evening, Mark learns that the investment fund will be offering a limited-time promotional fee reduction for new investors but only if they commit within the week.

Faced with this dilemma, Mark must decide how to proceed. Which of the following actions is the most ethically appropriate step for Mark to take?

Advise Mrs. Green to invest in the fund, citing the promotional fee reduction as an enticing reason, while neglecting to disclose his concerns about the fund's performance.

Explain Mrs. Green's risk-averse profile and advise her against the investment, regardless of the limited-time fee reduction, prioritizing her long-term financial security.

Encourage Mrs. Green to invest in the fund but recommend a smaller amount, suggesting that she can test its performance before deciding to invest more.

Hint

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