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03 May 2018

Ethics in Practice: Good Advice to Move Retirement Funds? Case Analysis Now Included

CFA Institute Ethical Decision-Making Framework

What did you decide about the financial planner’s actions in this week’s “ripped from the headlines” case (30 April)? This analysis is now available below.

Investors, particularly those saving for retirement, may turn to a financial planner to help them find the best investments to build their funds. What do you think about the advice the financial planner in this week’s case gave to his clients? Read the case and then join the conversation to let us know what you think and which CFA Institute Standard of Professional Conduct may be involved.


Urquhart is a financial planner for AKC, which runs a large network of financial planners. AKC compensates its planners based on the number of sales of AKC products. Urquhart advises a husband and wife to roll their retirement funds, which combined are worth $125,000, from one service provider into a single AKC investment fund that follows a large-cap equity strategy. Urquhart discloses to the couple that they will have to pay a penalty totaling $30,000 for closing their accounts, but they will make up this loss with better investment returns from the AKC product. Urquart’s actions are

  1. acceptable if the AKC product is suitable for the couple.
  2. unacceptable because he is promising a specific rate of return.
  3. acceptable because he fully disclosed the negative consequences of closing their accounts.
  4. unacceptable unless the performance history of the AKC product supports his statement about future returns.


This case involves CFA Institute Standard I(C): Misrepresentation, which states that CFA Institute members and candidates must not knowingly make any misrepresentation related to investment analysis, recommendations, or actions. This standard prohibits making any statements promising or guaranteeing a specific rate of return on volatile investments. Even if the AKC product is suitable for the couple, it is an equity-based investment that is inherently volatile. Urquhart cannot make promises about future returns, even if the historical performance return would have reached the performance goal. Although he fully discloses the negative consequences of transferring their assets to the AKC product, that disclosure does not mitigate the inappropriate statement about future expected returns. Therefore, the best answer is B. As an aside, this case also raises questions about whether advising the couple to take such a significant loss in their retirement savings would be in their best interest and whether Urquhart’s independence and objectivity is compromised because he is influenced to make such a recommendation by the compensation scheme of his employer.

This case is based on details coming out of the current regulatory inquiry into the practices of financial services company AMP in Australia.

Have an idea for a case for us to feature? Send it to us at

More About the Ethics in Practice Series

Just as you need to practice to become proficient at playing a musical instrument, public speaking, or playing a sport, practicing assessing and analyzing situations and making ethical decisions develops your ethical decision-making skills. The Ethics in Practice series gives you an opportunity to “exercise” your ethical decision-making skills. Each week, we post a short vignette, drawn from real-world circumstances, regulatory cases, and CFA Institute Professional Conduct investigations, along with possible responses/actions. We then encourage you to assess the case using the CFA Institute Ethical Decision-Making Framework and through the lens of the CFA Institute Code of Ethics and Standards of Professional Conduct. Then join the conversation and let us know which of the choices you believe is the right one and explain why. Later in the week, we will post an analysis of the case and you can see how your response compares.

Image Credit: ©CFA Institute

About the Author(s)
Jon Stokes

Jon Stokes is the Director of Ethics and Standards Education at CFA Institute. His responsibilities include design and creation of on-line ethics education, development and maintenance of the CFA Institute Code of Ethics and Standards of Professional Conduct, and the design and management of the CFA Institute Ethical Decision-Making and Giving Voice to Values education programs. Stokes holds a JD degree.

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