CFA Duty of Suitability in Investment Recommendations

Medium Cfa Institute Code And Standards Duties - Suitability

Maria is a CFA charterholder and an investment advisor at a wealth management firm. She is meeting with a new client, John, who is a 30-year-old software engineer. John expresses that his primary investment goal is to save for retirement, which he would like to achieve in approximately 30 years. He is risk-averse and prefers safe investments, but he is also interested in the potential growth of his portfolio over time. Maria, however, recommends a high-risk investment strategy based on her assessment that John has a high tolerance for risk due to his relatively young age. In this scenario, what is the most appropriate action for Maria according to the CFA Institute Code of Ethics and Standards of Professional Conduct regarding her duty of suitability?

Recommend the high-risk investment strategy, as young clients typically have a higher risk tolerance.

Assess John's complete financial situation and recommend investments that align with his risk tolerance and goals.

Advise John to invest only in conservative, lower-risk vehicles, irrespective of his interest in growth.

Hint

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