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Answer: No, because the policy should specify that allocations of funds to advisers be reviewed at least annually
## Explanation Carlson's policy is **not** consistent with the Standard relating to diligence and reasonable basis. ### Standard V(A) - Diligence and Reasonable Basis This standard requires members to exercise diligence and have a reasonable basis for investment actions and recommendations. ### Where the Policy Fails **The two-year review period is inadequate** for monitoring external investment advisors. ### Key Considerations 1. **Frequency of Review**: Investment markets and advisor performance can change significantly within two years 2. **Best Practice**: Most industry standards recommend **at least annual reviews** of external managers 3. **Risk Management**: Longer review periods increase the risk of: - Poor performance going undetected - Style drift in investment approach - Changes in key personnel - Deterioration in investment processes ### Policy Improvements Needed - Review external advisors **at least annually** - Consider more frequent reviews for: - Newly hired managers - Managers with volatile performance - Managers undergoing significant changes While standardized criteria can be appropriate, the inadequate review frequency makes the policy inconsistent with the requirement for ongoing diligence in investment decisions.
Author: LeetQuiz Editorial Team
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Geoff Carlson, CFA, is responsible for selecting external investment advisors for his asset management firm. Carlson designs a manager selection policy for his firm that specifies a standardized set of criteria for evaluating the adequacy of external advisors. The policy specifies that fund allocations to external advisors should be reviewed every two years.
Is Carlson's policy consistent with the Standard relating to diligence and reasonable basis?
A
Yes
B
No, because the policy should specify custom criteria for each advisor type
C
No, because the policy should specify that allocations of funds to advisers be reviewed at least annually
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