Determining Suitability for Conservative Investor

Hard Cfa Institute Code And Standards Duties - Suitability

John is a financial advisor who is preparing to present investment options to a new client, Ms. Smith, who is a conservative investor seeking stable income. During the initial meeting, Ms. Smith discloses that she is looking for investments that have minimal risk and emphasize preservation of capital. However, John is very enthusiastic about a new high-yield mutual fund that he believes will deliver exceptional returns over the next year. Which of the following actions should John prioritize to comply with the CFA Institute Code of Ethics and Standards of Professional Conduct regarding suitability?

Present the high-yield mutual fund to Ms. Smith as it may yield high returns, despite its risks.

Evaluate investment options that align with Ms. Smith's conservative profile before making any recommendations.

Proceed with recommending the high-yield mutual fund but advise Ms. Smith to consider diversifying into safer investments later.

Hint

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