Series 66 Client-Based Question Set

🧾 Series 66 Client-Based Question Set
📘 Sharpen Your Advisory Judgment with Realistic Client Scenarios

The Series 66 exam tests not only your knowledge of investment laws and ethics, but also your ability to apply them in client-specific scenarios. Below is a focused client-based question set designed to mimic the types of case-based questions you’ll encounter on the exam. Each question is followed by four answer choices. Answers and explanations are at the end.

🔢 Client Scenario Questions (Set of 10)

1. A 34-year-old tech entrepreneur wants to invest a $2 million windfall in a diversified portfolio. He has high risk tolerance and a 20-year horizon. Which allocation is most appropriate?

A) 70% equities, 20% bonds, 10% cash
B) 40% municipal bonds, 30% equities, 30% cash
C) 90% equities, 10% derivatives
D) 50% REITs, 50% high-yield bonds

2. A retired teacher wants to generate consistent monthly income from her portfolio and preserve principal. Which strategy is most suitable?

A) Invest in small-cap growth stocks
B) Purchase a laddered portfolio of investment-grade bonds
C) Allocate 80% to a tech-focused ETF
D) Buy zero-coupon bonds with 20-year maturities

3. A client wants to open a joint account with her adult son but doesn’t want him to make any trades without her approval. Which account type is best?

A) Joint Tenants with Rights of Survivorship (JTWROS)
B) Tenants in Common (TIC)
C) Individual Account with Power of Attorney
D) Joint account with discretionary authority

4. An 80-year-old widower lives off the income from his investments. He wants to avoid risk and values capital preservation. Which product is least suitable?

A) U.S. Treasury notes
B) Investment-grade corporate bonds
C) Municipal bond fund
D) Leveraged small-cap ETF

5. A client asks you to recommend a hedge fund. You notice her net worth is $800,000 and annual income is $200,000. What should you do?

A) Recommend the hedge fund as long as she signs a risk disclosure
B) Explain she is not a qualified investor and suggest an alternative
C) Proceed only if the fund has a low correlation to equity markets
D) Place her in the hedge fund under Regulation D Rule 506(b)

6. A 45-year-old client is in a high federal tax bracket and asks for a tax-advantaged income investment. Which is most appropriate?

A) Municipal bonds from her home state
B) High-yield corporate bonds
C) Treasury Inflation-Protected Securities (TIPS)
D) Preferred stock paying qualified dividends

7. A wealthy client wants to avoid probate and ensure that her investment account passes directly to her spouse. What is the best solution?

A) Set up a revocable living trust
B) Title the account as JTWROS
C) Open a trust account in her name only
D) Use a TOD (Transfer on Death) designation

8. A client nearing retirement wants to reduce portfolio volatility while maintaining some equity exposure. Which allocation best reflects this goal?

A) 80% equities, 20% options
B) 60% bonds, 30% equities, 10% cash
C) 100% target-date fund
D) 25% cash, 75% REITs

9. A client has $5 million in assets and wants to set up a charitable donation plan to minimize estate taxes and provide income during her lifetime. What is most suitable?

A) UGMA account
B) Irrevocable life insurance trust
C) Charitable remainder trust
D) Variable annuity

10. A client tells you he’s uncomfortable with market volatility and prefers investments with guaranteed returns. Which recommendation violates your fiduciary duty?

A) An FDIC-insured CD
B) A diversified bond ladder
C) A guaranteed indexed annuity
D) A biotech IPO with a 5-year lock-up

🧠 Answer Key & Explanations

1. ✅ A – Young, high net worth, high risk tolerance = heavy equities and some liquidity.
2. ✅ B – Laddered bonds balance income with risk and provide predictable payments.
3. ✅ C – Power of Attorney ensures son can act, but only when authorized.
4. ✅ D – Leveraged ETFs are volatile and unsuitable for conservative, income-seeking clients.
5. ✅ B – Client must meet the $1 million net worth or $200K income for 2 years to qualify.
6. ✅ A – Municipal bonds are federally tax-exempt and suitable for high-income clients.
7. ✅ D – TOD designation ensures direct transfer of assets and avoids probate.
8. ✅ B – Balanced, diversified, lower volatility for someone close to retirement.
9. ✅ C – CRTs provide lifetime income and tax benefits for large estates.
10. ✅ D – A biotech IPO with lock-up and high risk is not appropriate for a conservative client.

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