When you discover a conflict of interest while recommending a life insurance policy to a client who is also a beneficiary of a relative's policy you manage, what is the recommended course of action?

• A. Disclose the conflict, explain implications, obtain informed consent; recuse from related decisions if needed.
• B. Ignore the conflict to avoid upsetting the client.
• C. Terminate the engagement with the client.
• D. Disclose the conflict only after a decision is made.

Answer: (A)

Disclosing and managing conflicts of interest is essential whenever a professional’s ability to give objective advice may be compromised. When a client is also a beneficiary of a relative’s policy you manage, there is a real risk that recommendations could be influenced by personal interests rather than the client’s best interests. The proper course is to disclose the conflict to the client, explain how it could affect the advice, and obtain informed consent before moving forward. If the conflict cannot be managed through disclosure and consent, you should recuse yourself from related decisions to preserve impartial judgment. In this scenario, you should reveal the conflict, discuss its implications, secure informed consent, and step back from decisions tied to that policy if needed. This approach protects the client’s interests and upholds fiduciary duties. Disclosing after a decision is made, ignoring the conflict, or automatically ending the engagement without attempting to manage the conflict are not appropriate first responses.