HKSI Paper 12 Client objectives and the products available question: retired early after an illness

HKSI Paper 12Client objectives and the products available

Mrs Kwok's IPS was agreed two years ago while she was working. She has now retired early after an illness and will draw on her portfolio for living costs. What should her manager do?

A Review and revise the IPS now, because her objectives and constraints have changed materially
B Revise only the asset allocation, as an IPS's objectives cannot change once agreed
C Update only her risk profile questionnaire, as IPS objectives are set for the mandate's life
D Keep the IPS but raise the cash weighting until the next scheduled annual review

Show the answer and explanation

Answer: A. Review and revise the IPS now, because her objectives and constraints have changed materially

An IPS is reviewed on a schedule and also whenever the client's circumstances change materially. Early retirement changes Mrs Kwok's income, liquidity needs, time horizon and ability to bear risk, so the IPS must be revised now. The SFC's suitability FAQs also expect client information to be updated on a continuous basis where appropriate, and a discretionary mandate to be reviewed having regard to the client's latest circumstances. Raising cash until the annual review, updating only the questionnaire, or changing only the allocation all leave objectives and constraints that no longer fit her: the IPS itself must be revised. Source: Standard portfolio management practice (investment policy statement: objectives and constraints); SFC FAQs on Compliance with Suitability Obligations (sfc.hk, last updated 23 Jul 2026) Q2; SFC FAQs on Triggering of Suitability Obligations (sfc.hk, Dec 2018) Q3 (as at October 2026).

Common mistake

Assuming an IPS changes only on its review date. A material change in the client's life triggers a review at once.

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Related HKSI Paper 12 questions

Kelvin, 27, has just started his first job. He has no dependants, small savings and expects his income to rise steadily. Which life-cycle stage is he in, and what does it usually imply?Mr and Mrs Fung, both 55, plan to retire at 65 and then live off their portfolio for about 25 years. How is their time horizon BEST described?Mr and Mrs Leung have a HK$8,000,000 portfolio and need to withdraw HK$320,000 at the end of each year. They also want the portfolio to keep its real value, with inflation expected at 2.5% a year. Using the multiplicative method, what nominal return do they require?

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Original study material mapped to the public HKSI Paper 12 syllabus. Unofficial, not endorsed by HKSI Institute or the SFC. Verify figures and rules against current guidance before relying on them.

HKSI Paper 12 Client objectives and the products available question: retired early after an illness

HKSI Paper 12Client objectives and the products available

Mrs Kwok's IPS was agreed two years ago while she was working. She has now retired early after an illness and will draw on her portfolio for living costs. What should her manager do?

A Review and revise the IPS now, because her objectives and constraints have changed materially
B Revise only the asset allocation, as an IPS's objectives cannot change once agreed
C Update only her risk profile questionnaire, as IPS objectives are set for the mandate's life
D Keep the IPS but raise the cash weighting until the next scheduled annual review

Show the answer and explanation

Answer: A. Review and revise the IPS now, because her objectives and constraints have changed materially

Common mistake

Assuming an IPS changes only on its review date. A material change in the client's life triggers a review at once.

Practise more Paper 12 Client objectives and the products available questions

Exam-style questions with worked answers, then full timed mocks. Free to start.

Start practising →

Build a daily practice habit — a few exam-style questions a day, with worked answers. Free to start.

Start practising →

Original study material mapped to the public HKSI Paper 12 syllabus. Unofficial, not endorsed by HKSI Institute or the SFC. Verify figures and rules against current guidance before relying on them.