Responsibilities to Clients: Prioritizing Client Interests

Very Hard Professional Standards Application Responsibilities To Clients

Alicia is a CFA charterholder employed by a large investment advisory firm. She has been tasked with providing asset allocation recommendations to a new client, a technology company with a moderate risk tolerance and a preference for socially responsible investments. After conducting initial research, Alicia identifies several mutual funds that align with the client's requirements. However, she notices that one of the funds has a higher fee structure than the others, which could significantly impact the client's returns over the long term.

Before presenting her recommendations, Alicia receives an email from the fund with the higher fees, indicating they are willing to provide her firm with a referral bonus should she choose to include them in her proposed asset allocation. Alicia feels conflicted as she knows that this may not be in the best interest of her client.

Based on the CFA Institute's Code of Ethics and Standards of Professional Conduct, what should Alicia prioritize in her decision-making process?

Alicia should prioritize the referral bonus as it would benefit her firm financially.

Alicia should formulate a recommendation that aligns with her client's best interests, regardless of potential bonuses.

Alicia should include the higher fee fund in her recommendation to maintain good relations with the fund manager.

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