Concentration

What this video covers

• The exact definition of concentration risk: an outsized portfolio share in a single security, sector, asset class, issuer, or geography, and why it amplifies both upside and downside
• Why employer stock overweight is the single most-tested concentration source, and how the Employee Stock Purchase Plan (ESPP) and 401(k) company match create this scenario
• Whether a customer with only one mutual fund is automatically concentrated, and how to evaluate target-date funds versus sector funds under the hood
• The representative's duty to identify concentration across the customer's overall portfolio even when the representative did not recommend the concentrated position
• How a suitable standalone product becomes unsuitable when it deepens existing concentration, and how a marginal product becomes suitable when it reduces concentration
• Why tax cost is a factor to consider but never a trump card over concentration risk, and what tax-aware unwind strategies a representative can discuss
• How outside holdings disclosed by the customer (4O1(k) balances, old accounts) must factor into the Reg BI care obligation before any new recommendation