When evaluating a replacement investment, which factor is part of the best-interest assessment?

• A. Costs
• B. All of the above
• C. Portfolio impact
• D. Tax consequences

Answer: (B)

When deciding on a replacement investment, you must look at how the new option will affect the client’s overall financial picture from multiple angles. Costs matter because higher fees or charges reduce net returns over time. The portfolio impact matters because swapping a holding can change diversification, risk exposure, and alignment with the client’s asset allocation and time horizon. Tax consequences matter because selling a security and purchasing a new one can trigger taxes, affect tax efficiency, and influence after-tax returns. Considering all of these factors together ensures the recommendation truly serves the client’s best interests; ignoring any one aspect can misstate the true benefit. That’s why all of the above is the best answer.