IFIC Mutual Funds Licensing Practice Exam · Question
A mutual fund representative is considering recommending a new mutual fund to a client. Which of the following actions is part of the 'Know Your Product' (KYP) obligation before making the recommendation?
Know Your Product (KYP) requires representatives to thoroughly understand the features, risks, and costs of any investment product they recommend. Reviewing the
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Question: A mutual fund representative is considering recommending a new mutual fund to a client. Which of the following actions is part of the 'Know Your Product' (KYP) obligation before making the recommendation?
Answer options:
- Confirming the client's existing portfolio diversification.
- Analyzing the client's current income stability. ✅ Reviewing the fund's Fee Disclosure and Fund Facts, and understanding its investment objectives and risks.
- Assessing the client's emotional reaction to market volatility.
Correct answer: Reviewing the fund's Fee Disclosure and Fund Facts, and understanding its investment objectives and risks.
Explanation: Know Your Product (KYP) requires representatives to thoroughly understand the features, risks, and costs of any investment product they recommend. Reviewing the Fund Facts and understanding objectives/risks are essential KYP steps.
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