Uniform Combined State Law (Series 66) Practice Exam

To ensure compliance when receiving both a commission and advisory fees, a financial advisor must disclose total compensation to the client. This practice is essential for transparency and to uphold fiduciary duties. By providing clients with a clear understanding of all sources of compensation, including both commissions and advisory fees, the advisor allows clients to make informed decisions regarding the financial advice they receive. This disclosure helps to mitigate any potential conflicts of interest, ensuring that clients are fully aware of the financial implications of the services being provided to them.

While providing a breakdown of fees annually, offering a discount on future advisory fees, and maintaining detailed records are practices that can support compliance and good business practices, they do not specifically address the critical need to openly disclose the total compensation model being used. Transparency regarding total compensation is a fundamental regulatory requirement, especially in a dual-fee scenario, as it directly impacts client trust and the ethical standards of the advisory relationship.