Accredited Wealth Management Advisor Practice Exam

Which statement comparing suitability and fiduciary standards is correct?

1. Suitability disputes are resolved in arbitration while fiduciary disputes are in courts

2. Both standards require the adviser to be a fiduciary

3. Disclosure requirements are the same for both standards

4. Professionals answer to the same regulators under both standards

The correct answer is: Suitability disputes are resolved in arbitration while fiduciary disputes are in courts

The statement that compares suitability and fiduciary standards by asserting that suitability disputes are resolved in arbitration while fiduciary disputes are typically resolved in courts is accurate. This distinction arises from how these standards are governed and the nature of the relationships built with clients. In practice, suitability standards are often associated with broker-dealers and their conduct regarding investment recommendations. Disputes arising under these standards are usually settled through arbitration, a process commonly used in the financial services industry to resolve conflicts. This method is designed to be efficient and less formal than court proceedings, allowing for quicker resolutions. On the other hand, fiduciary standards apply to investment advisers who are legally bound to act in their clients' best interests. Disputes that arise under fiduciary standards may involve breaches of duty or misconduct and are typically addressed in court. This legal framework emphasizes accountability and allows clients to seek remedies for breaches of trust through the judicial system. This distinction highlights the different regulatory environments under which advisers operate, as well as the expectations for their conduct in relation to client interests. It underscores the legal implications of the standards, where fiduciaries must adhere to a higher level of accountability than those merely adhering to suitability standards.