Question

Joni is a financial planner for ABC firm. She provided all of her clients with the same products.

She felt this was OK since she had thoroughly researched them years ago and found them to be

excellent. By concentrating her recommendations with a few firms, she was able to receive

commission bonuses. She never discussed their goals and characteristics with her clients unless

they brought them up. Explain her violations of SEC and CFP regulations. Indicate what should

be done.

Case Analysis

Problems

Solutions

Recommendations

Conclusion

Answer 1

Case analysis: The case deals with financial planning and illustrates the example of Joni and how she provides financial advice to her clients in an inappropriate manner.

The SEC and the CFP regulations that Joni is violating is that she is not adhering to rigorous fiduciary standard. There is a best interest rule and Joni is clearly violating this rule as well as she is not considering the best interest of her clients when providing them with financial advice.

Problems –The key problem in this case is that Joni, as a financial planner, is providing all her clients with the same products. This is inappropriate. Each client is different in terms of financial goals and in terms of risk appetite. Hence a same financial product cannot be appropriate for all clients.

Solutions – The simple solution in this case is that Joni should review the needs, requirements, financial goals and objectives of her clients from time to time. This will help her determine their changing scenarios and the hence she will be able to change the product accordingly. For instance young people have a larger investment horizon and hence have a higher risk appetite. As such they can be recommended more of equity products. On the other hand people nearing retirement or with low risk appetite should be recommended fixed income products.

Recommendations – Joni should determine the best interest of her clients and then place the interests of her clients above her interest and work in a diligent manner to ensure that her client’s interests are best served. Joni should provide financial advice that is both competent as well as ethical.

Conclusion – Clearly Joni is required to put more efforts in her job as a financial planner and she should work arduously to determine goals and objectives of each of her client separately. She should also determine their risk appetite and then should recommend appropriate financial products that will help them to achieve their financial goals within their risk constraints.