Mrs. Chen has been a client of a mutual fund representative for five years. Her portfolio consists primarily of growth-oriented mutual funds. During her annual review, she expresses concerns about recent market volatility and indicates she might be retiring in the next three years, earlier than originally planned. Which of the following is the most appropriate course of action for the representative?

Question: Mrs. Chen has been a client of a mutual fund representative for five years. Her portfolio consists primarily of growth-oriented mutual funds. During her annual review, she expresses concerns about recent market volatility and indicates she might be retiring in the next three years, earlier than originally planned. Which of the following is the most appropriate course of action for the representative?

Answer options:

• Reassure Mrs. Chen that market volatility is normal and advise her to maintain her current growth-oriented portfolio since she has a long investment horizon. ✅ Suggest a comprehensive review of her financial goals, risk tolerance, and time horizon, and potentially recommend adjustments to her portfolio to align with her revised retirement timeline and risk comfort.
• Process a switch of her growth-oriented funds to more conservative fixed-income funds immediately, assuming her risk tolerance has decreased.
• Schedule another meeting in six months to see if her view on retirement and market volatility has changed before making any recommendations.

Correct answer: Suggest a comprehensive review of her financial goals, risk tolerance, and time horizon, and potentially recommend adjustments to her portfolio to align with her revised retirement timeline and risk comfort.

Explanation: An annual review is a critical opportunity to assess changes in a client's personal and financial circumstances. Early retirement and increased concern about market volatility are significant changes that warrant a full reassessment of her investment suitability and potential portfolio adjustments.