CMFAS RES5 Ethics Foundations question: advise on a dual-currency investment product

CMFAS RES5Ethics Foundations

A life insurance representative with no training in derivatives is asked by a client to advise on a dual-currency investment product. Under the principle of competence, the representative should:

A Give the advice anyway, relying on the product summary, to avoid losing the client to a competitor
B Advise only within his sphere of competence, refusing to act outside it and upgrading his competence first
C Recommend the product without disclosing his lack of derivatives training, provided it appears suitable
D Guarantee the product's returns in writing so that the client feels reassured about the risks

Show the answer and explanation

Answer: B. Advise only within his sphere of competence, refusing to act outside it and upgrading his competence first

The principle of competence demands that representatives advise or sell only within their sphere of competence and have the moral courage to admit what they do not know, refusing to act outside their area of expertise. The text's example shows a representative should upgrade competence before advising in a new area.

Common mistake

Competence means declining or upskilling — not advising outside your expertise to keep the client.

Practise more RES5 Ethics Foundations questions

Exam-style questions with worked answers, then full timed mocks. Free to start.

Start practising →

Study note: Ethics Foundations CMFAS RES5practice questions & mock exams

Related CMFAS RES5 questions

Under the 'equality' concept of the principle of fairness — to 'treat like things in like ways' — which pricing practice is consistent with the principle?The study text defines ethical decision-making as evaluating and choosing among alternatives consistently with ethical principles. It notes that people bring different 'worldviews' to this process. The significance of differing worldviews is that they A bank reserves an attractive, higher-yielding investment opportunity for its high-net-worth clients while offering its retail clients — to whom it owes the same obligations — only inferior products. In the study text's five types of misalignment of interest, this is a conflict between

Build a daily practice habit — a few exam-style questions a day, with worked answers. Free to start.

Start practising →

Original study material mapped to the public CMFAS RES5 syllabus. Unofficial, not endorsed by MAS or SCI. Verify figures and rules against current guidance before relying on them.