Lesson 3 of 7 · All lessons in this module
- Standard V: Investment Analysis, Recommendations, and ActionsVideo lesson
- Standard V(A) cases: reasonable basis and outside research
- Standard V(A) cases: models, advisers and providers
- Standard V(B) cases: services, costs and process changes
- Standard V(B) cases: risks, limitations, facts and opinions
- Standard V(C) cases: records and retention
- Standard V cases: what the 2027 text adds
This lesson is part of the 2027 curriculum. You are following the 2026 curriculum, where it is not taught in this form. Switch if you are sitting the exam under the 2027 curriculum.
Lesson 3 of 7 · 15 min
Standard V(A) cases: models, advisers and providers
Models and external managers are judged like securities: understand what they assume, test them before use, and never choose on a single feature such as fees, friendship or a demonstration.
In short
- A user of a model must understand its assumptions and limits and test its output; a builder owes a higher level of diligence and must test the whole, not only the parts.
- Scenario sets need the severe but possible, including cases outside what the historical database contains.
- Accountability follows the recommendation the model produces, not the trade ticket: a modeller who never trades is still answerable for quality.
- Select external advisers and service providers with standard criteria: code of ethics, controls, quality of published returns, process and adherence to strategy.
- No single feature carries a selection: fees, returns, a GIPS claim, friendship or a good demo fall short alone, and what a manager reports about itself must be verified.
Unlock this lesson free for 7 days
Create a free account to get 7 days free: every lesson, video and flashcard, and the question bank. No card needed.