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IBBC CAPITAL ACADEMY / 2027

Match advice to a client before chasing yield

Independent IBBC Capital draft content for self-study. Not affiliated with or endorsed by CFA Institute. New lessons await subject-matter review. No CFA designation or official PSM credit is awarded.

Learning goals

  • Which action best addresses the central case issues?
  • Explain why liquidity and short-horizon risk capacity applies to this case.
  • Identify the case-specific assumption or failure mode before taking action.

Draft · approximately 30 minutes, excluding further revision.

Shared case and decision context

A retired client needs a liquid reserve in six months and cannot tolerate a large loss. An adviser recommends an illiquid leveraged fund because its backtest is strong. The adviser also sends a new recommendation to friends before other eligible clients and receives a request for the client’s private account details.

Economic or professional mechanism

Suitability assesses objectives, ability and willingness to bear risk, liquidity, horizon and the total portfolio under the mandate. A historical performance statistic does not override a short-horizon liability. Fair dealing concerns equitable treatment in recommendations and actions; it does not require identical portfolios for clients with different needs.

Apply, challenge and communicate

Reserve the dated liquidity need and reconsider the fund against the client profile before any recommendation. Use a fair dissemination policy for eligible clients. Protect confidential account information unless an appropriate permitted or required exception applies; verify authority and involve compliance rather than disclosing on an informal request.

Formula and assumptions

Suitability=client circumstances+mandate+portfolio context, not product return alone

Case analysis with explicit assumptions

  1. A retired client needs a liquid reserve in six months and cannot tolerate a large loss. An adviser recommends an illiquid leveraged fund because its backtest is strong. The adviser also sends a new recommendation to friends before other eligible clients and receives a request for the client’s private account details.
  2. Method: Suitability=client circumstances+mandate+portfolio context, not product return alone
  3. Case result: Address liquidity and reassess suitability before recommending. Reserve the dated liquidity need and reconsider the fund against the client profile before any recommendation. Use a fair dissemination policy for eligible clients. Protect confidential account information unless an appropriate permitted or required exception applies; verify authority and involve compliance rather than disclosing on an informal request.

Errors to catch

  • Do not replace the stated assumptions with an unstated shortcut. Reconcile units, timing and the claim being valued or duty being assessed.
  • Immediate public disclosure is not a defensible conclusion for these case facts.

Original knowledge check

Answer every question before checking. Review explanations after submitting; retry starts a new attempt.

Sources and coverage status

These original lessons are drafts. Public outlines are used to check scope; the official learning-outcome text and proprietary question banks are not reproduced here. Follow the source for exam-year requirements and updates.