Sales, Marketing, and Client Suitability Practices
What this domain tests
This domain tests fair marketing, risk profiling, product matching, and documentation of suitability. Questions often present a client scenario and ask whether the recommendation is appropriate.
Core rules and concepts
- Marketing must be fair, balanced, and not misleading. No principal guarantee, no promised return, and no implication that past performance predicts future results.
- Performance must be presented net of fees where required, over standard periods, with the required risk disclosure. Hypothetical or back-tested results must be labeled.
- Suitability requires knowing the client's objectives, horizon, liquidity needs, risk tolerance, capacity for loss, and experience. The recommended fund must match the client's risk profile.
- A client may refuse a recommendation, but the adviser must still document the profile, the recommendation, and the client's decision.
- Reassess suitability when the client's circumstances change or when the fund's risk profile changes materially.
Worked example
A 70-year-old retiree needs PHP 500,000 in 12 months for medical expenses and has low risk tolerance. An equity UITF with a 15% recent return is unsuitable because a 20% drawdown would leave about PHP 400,000 at the withdrawal date. A money market or short-duration bond UITF better matches the one-year horizon and low loss capacity. If the client insists on equity, document the advice and acknowledgment, but do not describe the fund as safe.
Traps that cost marks
Chasing recent returns; calling a fund guaranteed or low risk without support; using gross performance; ignoring the client's liquidity date; recommending a product because it pays higher compensation; failing to document the suitability assessment.