A CIM-designated portfolio manager has been managing a high-net-worth client's diverse investment portfolio for several years. The client, an elderly widow with no close relatives, recently expressed her intention to name the portfolio manager as the sole beneficiary in her will, citing her immense trust and gratitude. Which of the following actions is the most appropriate for the portfolio manager to take in this situation?

Question: A CIM-designated portfolio manager has been managing a high-net-worth client's diverse investment portfolio for several years. The client, an elderly widow with no close relatives, recently expressed her intention to name the portfolio manager as the sole beneficiary in her will, citing her immense trust and gratitude. Which of the following actions is the most appropriate for the portfolio manager to take in this situation?

Answer options: ✅ Politely decline the offer, explaining that such an arrangement creates an insurmountable conflict of interest and violates professional ethics.

• Advise the client to seek independent legal counsel regarding her will, while accepting the nomination as a beneficiary to respect her wishes only if legal counsel approves.
• Accept the nomination, but immediately disclose the situation to their compliance department and implement a strict internal firewall to prevent any preferential treatment of the client's account.
• Suggest the client make a significant charitable donation in her will instead, thereby diverting the focus from the portfolio manager as a beneficiary.

Correct answer: Politely decline the offer, explaining that such an arrangement creates an insurmountable conflict of interest and violates professional ethics.

Explanation: Accepting a significant bequest from a client creates an insurmountable conflict of interest, as it could appear to unduly influence investment decisions. The most ethical and professional action is to politely decline such an offer, emphasizing the importance of professional boundaries and adhering to the CIM Code of Ethics.