A financial planner is advising a client with a history of sporadic employment and difficulty managing credit. The client has an outstanding non-registered investment portfolio of $75,000 with an average annual return of 7% and a $10,000 credit card debt at 22%. The client insists on holding onto their investments, citing long-term growth potential. Given the client's financial history, what is the most ethically sound and financially prudent advice a planner should provide regarding the credit card debt?

Question: A financial planner is advising a client with a history of sporadic employment and difficulty managing credit. The client has an outstanding non-registered investment portfolio of $75,000 with an average annual return of 7% and a $10,000 credit card debt at 22%. The client insists on holding onto their investments, citing long-term growth potential. Given the client's financial history, what is the most ethically sound and financially prudent advice a planner should provide regarding the credit card debt?

Answer options:

• Advise the client to continue making minimum payments on the credit card and focus on maximizing investment returns. ✅ Recommend selling enough investments to pay off the credit card immediately, emphasizing the guaranteed 'return' of 22%.
• Suggest a balance transfer to a lower-interest credit card, while cautioning against increasing spending.
• Recommend a full financial literacy course while exploring a debt management plan, preserving investment assets.

Correct answer: Recommend selling enough investments to pay off the credit card immediately, emphasizing the guaranteed 'return' of 22%.

Explanation: The guaranteed 'return' from eliminating 22% credit card debt far outweighs the uncertain 7% investment return. For a client with a history of poor credit management, removing this high-interest, persistent burden is paramount for financial stability, even if it means liquidating some investments. This prevents further interest accumulation and provides immediate, substantial relief.