Duty of Suitability in Client Investment Recommendations

Easy Cfa Institute Code And Standards Duties - Suitability

A financial advisor is working with a client who is several years away from retirement and has a high-risk tolerance. The advisor recommends a portfolio that is heavily invested in equities. However, the client has expressed an interest in including some low-risk investments for liquidity purposes, highlighting a need for emergency funds.

According to the CFA Institute Code of Ethics and Standards of Professional Conduct, which of the following actions most appropriately addresses the advisor's duty of suitability for this client?

The advisor should solely recommend an all-equity portfolio based on the client's stated risk tolerance.

The advisor should incorporate a portion of low-risk investments into the portfolio to address the client's expressed need for liquidity.

The advisor should prioritize high-risk investments, regardless of the client’s liquidity needs, as the client has a high-risk tolerance.

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