FINRA Series 6 Investment Company and Variable Contracts Products Representative ExaminationProfessional Conduct and Ethical ConsiderationsMedium
A client expresses concern to their registered representative (RR) that their monthly account statement contains confusing jargon and is difficult to understand. The client specifically points out complex performance metrics and fee disclosures. What is the RR's most appropriate action?
- AOffer to personally review the statement with the client, explaining each section in clear, concise language.
- BSuggest the client switch to a simpler investment product that has less complex statements.
- CExplain that the statements are standardized by regulatory bodies and cannot be altered.
- DAdvise the client to consult a tax advisor or financial planner for help interpreting the statement.
Show answer & explanationAnswer & explanation
Correct answer: A. Offer to personally review the statement with the client, explaining each section in clear, concise language.
RRs have an ethical responsibility to ensure clients understand their investments and account information. Offering to review and explain the statement in plain language demonstrates a commitment to client understanding and fair dealing.
Why the other options are wrong
- B. Suggesting a product change solely due to statement complexity is not appropriate and avoids the RR's responsibility to educate.
- C. While statements have standardized elements, the RR still has a duty to help clients understand them.
- D. While advisors can help, the RR should first attempt to clarify questions related to the accounts they manage.
Client Understanding (Statements)
The ethical obligation of a registered representative to help clients understand their account statements, investment performance, fees, and other complex financial information.
- Promotes transparency and trust.
- Helps clients make informed decisions.
- RRs should be prepared to explain jargon in plain language.
- Part of broader suitability and fair dealing obligations.
Memory trick: Confused by statements? Explain it clear, make understanding near.