SERIES 6 EXAM ASKS ABOUT SUITABILITY OF RECOMMENDATIONS

When recommending a mutual fund to a potential customer, a representative needs to observe suitability.  But FINRA says that suitability really has three parts that you need to consider.  Is ABC Fund suitable in general?  Are its expenses reasonable?  Does it provide diversification?  These questions deal with what is called "reasonable-basis suitability."  In addition, ABC Fund needs to be suitable for this specific customer.  For example, the customer tells you that she is looking for a bond fund.  Are you recommending instead a common stock fund?  If so, this would not pass the customer-specific requirement.  Lastly, are you recommending shares of ABC Fund when the customer already owns, say, $50,000 worth of ABC shares?  This probably would not pass the "quantitative suitability" test. Why not?  Because your recommendation would concentrate much if not all of the customer's assets in one particular fund.  Perhaps, at this point, the customer needs a fund that offers negative correlation.

FINRA'S STUDY OUTLINE FOR THE SERIES 6 - A SLOPPY JOB OF COVERING TOPICS

If you plan on taking the Series 6 exam, you may want to take a look at FINRA's syllabus or study outline for the test.  It is on FINRA's website.  Here's the link.

But be forewarned.  This Series 6 study outline, dated 2012, is among the more confusing of study outlines that FINRA has ever produced.  The question samples at the back contain at least one wrong answer.  The outline needs a good editor.  There is no logical progression of topics.  FINRA needs to re-do this one!