What requirement does the buddy system impose on financial advisors?

What requirement does the buddy system impose on financial advisors?

• A. An advisor must have another IA handle existing clientele.
• B. An advisor must inform clients of market changes immediately.
• C. An advisor must report all trades to a supervisor.
• D. An advisor must conduct quarterly reviews with clients.

Answer: (A)

The buddy system for financial advisors establishes that an advisor needs to collaborate with another investment advisor (IA) to handle the existing clientele. This system is designed to enhance accountability and ensure that clients receive continuous service, especially in situations where the primary advisor may be unavailable. By having a secondary advisor involved, it promotes a greater degree of oversight, thereby reducing risks associated with miscommunication or oversight.

This requirement enhances the advisor's professional conduct by ensuring that clients are always supported and have access to investment advice, instilling greater confidence in the advisory process. Maintaining a dual system fosters checks and balances in the handling of client accounts, which is essential for upholding fiduciary responsibilities and compliance with regulatory frameworks.