Chartered Financial Analyst (CFA) Practice Exam Level 2

The lack of independence in financial contexts can often be linked to what type of relationships?

1. Professional only

2. Family and personal connections

3. Online affiliations and social media ties

4. Non-business related activities and interests

The correct answer is: Family and personal connections

The connection between a lack of independence in financial contexts and family and personal relationships is significant because such connections can create conflicts of interest and influence decision-making. When financial professionals or analysts have personal ties, they may struggle to maintain objectivity in their assessments or recommendations. For instance, if someone is assessing a company's stock but has a family member working for that firm, their judgment may be swayed by personal loyalty rather than grounded in financial analysis. These personal relationships often lead to perceived or real biases; stakeholders may question the reliability of advice or opinions given by someone who could be influenced by personal loyalties. Maintaining independence requires a clear separation from personal emotions, which can be challenging in cases involving family or close friends. While other types of connections, such as professional relationships or online affiliations, can also create dependencies or influence, the intimate nature of family and personal connections generally poses a more direct threat to an individual’s objectivity in financial contexts.