Ethical Decision-Making Field Manual \#5: The Client Directive Reflection Page Case Summary: The Client Directive Transcript for Comments from Barbara Petitt, CFA, Head, Curriculum and Learning Experience, CFA Institute I think this case is a typical situation where a client comes to an advisor with their own recommendation about their own portfolio. So, it's like I go to the doctor's tomorrow, I walk into the room and I tell them that this is the illness I have, this is the drug that I want and all I want them is to sign the piece of paper and send me to the pharmacy. That's not quite what the profession is about. I think what this case shows is that there are three key principles that the financial advisor needs to keep an eye on. One is the suitability of the investment. Is that investment suitable to address the needs of the client? The second one is diligence. It's great that the clients tell us what they want to do, but it's our responsibility to do the due diligence to ensure that that's the right thing. And then there needs to be a basis for making the decision and that needs to be more probably than just a client asserting that this is the way they want to do it. Now, the fact that a client has got some views, some suggestions and things that they want to discuss with their advisor is absolutely fine. But it's the responsibility of the advisor in this particular situation to guide the client through that process of understanding their goals, understanding why they think this is a great idea, and perhaps make them think about the pros and the cons, and whether it really fits with their needs. And that's really what turns around the person coming in and saying, "This is what you have to do" into "Let's have a conversation about what's suitable for your needs and how we can make sure you achieve your goals." This case involves suitability of investments, diligence, and reasonable basis. As investment professionals, we have a duty to exercise diligence and thoroughness in carrying out our responsibilities, especially if it involves undertaking investment analysis or making recommendations. Investment advisers such as Daniel, have a duty to determine if an investment recommendation is suitable to the client's financial situation. Daniel should analyze both the merit of Crabtree Capital and the appropriateness of the investment in the context of Ricardo's portfolio prior to following Ricardo's directive to invest in the fund. You can read another case about suitability or investments, diligence, and reasonable basis in this Resource. Barbara Petitt suggests asking clients the type of questions we would ask ourselves before making an investment choice, in order to ensure the client is as informed as possible. Do you agree with Barbara that this approach would be successful? Why or why not? Can you share any experiences you've had that mimic the one in the case? Share your response in 420 characters or