Maria's Ethical Dilemma: Client Responsibilities

Very Hard Professional Standards Application Responsibilities To Clients

Maria is a financial advisor at Insight Wealth Management. She has a high-net-worth client, Mr. Thompson, who is looking to invest his entire portfolio into a high-yield bond fund, which could provide substantial returns but carries significant risk. Maria has conducted a thorough analysis and found that a diversified equity portfolio would better align with Mr. Thompson’s long-term goals, risk tolerance, and investment horizon. However, her firm has a strong incentive to promote the high-yield bond fund and has offered Maria a substantial bonus for each new investment in that fund.

Considering the ethical guidelines of the CFA Institute regarding professional responsibilities to clients, what should Maria do to best uphold her ethical obligations?

Advise Mr. Thompson to invest in the high-yield bond fund while disclosing the potential risks, as it would secure her financial gain.

Recommend the diversified equity portfolio, prioritizing Mr. Thompson's best interests despite the lack of financial incentive for herself.

Encourage Mr. Thompson to split his investment between both funds to mitigate risk and still take advantage of the high-yield bond fund.

Hint

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