A.6 Fiduciary standard and application

Question 1

Define:

Duty of Impartiality

Answer 1

The duty of impartiality requires fiduciaries to act fairly and impartially when managing and distributing the assets of a trust or estate, without favoritism among beneficiaries.

A.6 Fiduciary standard and application

Question 2

Define:

Finduciary Advisor

Answer 2

A fiduciary advisor is a financial professional who is legally and ethically bound to act in the best interests of their clients, adhering to fiduciary standards and principles.

A.6 Fiduciary standard and application

Question 3

Explain:

ERISA

Answer 3

The Employee Retirement Income Security Act (ERISA) sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans.

A.6 Fiduciary standard and application

Question 4

Define:

Fiduciary Account

Answer 4

A fiduciary account is an account managed by a fiduciary, who is legally required to act in the best interest of the account’s beneficiary.

A.6 Fiduciary standard and application

Question 5

*Define: *

Beneficiary

Answer 5

A beneficiary is a person or entity entitled to receive benefits from a fiduciary, such as the income or principal from a trust.

A.6 Fiduciary standard and application

Question 6

Define

Fiduciary Relationship

Answer 6

A fiduciary relationship is a relationship of trust and confidence between two parties, where one party has an obligation to act in the best interest of the other.

A.6 Fiduciary standard and application

Question 7

*Define: *

Trustee

Answer 7

A trustee is an individual or organization that holds and manages assets in a trust on behalf of the beneficiaries, with fiduciary duties to act in their best interests.

A.6 Fiduciary standard and application

Question 8

*Define: *

Trust

Answer 8

A trust is a fiduciary relationship in which one party holds legal title to property for the benefit of another party.

A.6 Fiduciary standard and application

Question 9

*Define: *

Fiduciary Rule

Answer 9

The fiduciary rule is a regulation that requires financial advisors and brokers to act in the best interests of their clients when providing retirement advice.

A.6 Fiduciary standard and application

Question 10

*Explaine: *

Full Disclosure

Answer 10

Full disclosure requires fiduciaries to provide all relevant information to their clients, ensuring transparency and informed decision-making.

A.6 Fiduciary standard and application

Question 11

Explain:

Breach of Fiduciary Duty

Answer 11

A breach of fiduciary duty occurs when a fiduciary fails to act in the best interest of their client, violating their duties of loyalty, care, or good faith.

A.6 Fiduciary standard and application

Question 12

*Explain: *

Fiduciary Responsibility

Answer 12

Fiduciary responsibility refers to the legal and ethical obligations of fiduciaries to act in the best interests of their clients or beneficiaries.

A.6 Fiduciary standard and application

Question 13

*Define: *

Suitability Standard

Answer 13

The suitability standard requires financial advisors to recommend products that are suitable for the client’s financial needs and situation, but it does not require prioritizing the client’s best interest.

A.6 Fiduciary standard and application

Question 14

*Explain: *

Best Interest Standard

Answer 14

The best interest standard mandates that fiduciaries prioritize the interests of their clients above their own in all advice and actions.

A.6 Fiduciary standard and application

Question 15

*Define: *

Conflict of Interest

Answer 15

A conflict of interest occurs when a fiduciary’s personal interests potentially interfere with their duty to act in the best interest of their client.

A.6 Fiduciary standard and application

Question 16

Explaine

Prudent Investor Rule

Answer 16

The Prudent Investor Rule requires fiduciaries to invest and manage assets as a prudent investor would, considering the needs of the beneficiaries and the purpose of the trust.

A.6 Fiduciary standard and application

Question 17

*Explain: *

Duty to Follow Client Instructions

Answer 17

Fiduciaries must follow the lawful instructions of their clients, as long as those instructions are consistent with the fiduciary duty owed to the client.

A.6 Fiduciary standard and application

Question 18

Explain:

Duty of Care

Answer 18

The duty of care obligates fiduciaries to make decisions with the same care that a reasonably prudent person would take under similar circumstances.

A.6 Fiduciary standard and application

Question 19

*Explain: *

Duty of Loyalty

Answer 19

The duty of loyalty requires fiduciaries to act in the best interest of their clients, avoiding conflicts of interest and self-dealing.

A.6 Fiduciary standard and application

Question 20

Define:

Fiduciary

Answer 20

A fiduciary is a person or organization that acts on behalf of another person, putting their clients’ interests ahead of their own, with a duty to preserve good faith and trust.

A.6 Fiduciary standard and application