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Financial Planning and Advice > 1 - Financial Planning - (17/80) > Flashcards

1 - Financial Planning - (17/80) Flashcards

1
Q

6-Step Financial Planning Process

A
  1. Establish and define relationships
  2. Collect info (goals, objectives, priorities)
  3. Analyse financial situation
  4. Develop recommendations and present
  5. Implement recommendations
  6. Review and modify
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2
Q

Financial planning vs Financial advice

A 
Planning = changes over time
Advice = static
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3
Q

What may clients need to be provided with?

A 
Financial plan
Client agreement
Suitability report
Product information
KIID
Illustrations
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4
Q

Financial Plan Process (5 steps)

A
  1. State current position
  2. Evaluate current position
  3. Client objectives and time horizons
  4. Demonstrate shortfall
  5. Recommend solutions
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5
Q

Financial Plan Contents (long list)

A

Objectives and priorities
Assumptions
Attitudes to risk

Net worth
Income and expenditure

Recommendations
Other issues
Action plan
Review schedule
Other relevant people/set ups

Appendices

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6
Q

Nature of Client-Adviser Relationship

A

Regulatory duties = FCS terms of business etc.

Contractual duties = business or client agreements

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7
Q

Approved Person Responsibilities (FCA)

A

Act with integrity
Skill, care, due diligence
Market conduct standards
Deal openly with regulators

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8
Q

Collecting Client Information - Types of Questions

A

Ask open and closed questions

Open = soft data e.g. "How do you feel about investing in equities?"
Closed = hard data e.g. "How old are you?"
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9
Q

Collecting Client Information - FCA Requirements

A

Must fill out KYC forms and do background/AML checks

Shows evidence/paper trail of acting in client best interests

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10
Q

Fact-Finding process

A
  1. Personal information
  2. Financial information
  3. Objectives
  4. Attitude to risk
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11
Q

Risk Profiling

A
  1. Appetite for risk = amount willing to take
  2. Risk tolerance = comfort with volatility levels
  3. Capacity for loss
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12
Q

Affordability and Suitability

A

Include assessments of liquidity needs and time horizons

Must satisfy needs, risk profile, expertise
Must remain considerate of ethical/religious intentions

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13
Q

Advice vs Guidance

A 
Advice = regulated, about specific products/solutions
Guidance = generic, customer makes own decision

E.g. guidance = “Investing in the UK stock market is wise”
Advice = “Purchase this FTSE 100 tracker from Vanguard”

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14
Q

The Money and Pensions Service

A

Combines 3 older government guidance bodies:

  1. The Money Advice Service
  2. Pension Wise
  3. The Pensions Advisory Service
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15
Q

UK Strategy for Financial Wellbeing

A
  1. Financial Foundations
  2. Nation of Savers
  3. Credit Counts
  4. Better Debt Advice
  5. Future Focus

FAMR recommended ‘streamlined advice’ from the government

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16
Q

Letter of Authority

A

Authorises the adviser to conduct business with providers on behalf of the client

17
Q

Analysing Client Circumstances - Current Circumstances

A

Assets and Liabilities
Income and Expenditure
Attitude to risk
Capacity for loss

All might change over time

18
Q

Analysing Client Circumstances - Net Worth Statement

A

Must agree on what assets and liabilities to include
Must pry into the client to uncover all relevant A&L

Should be granular e.g. asset classes, types of debt

Scenario analysis should be included e.g. if CIC policy pays out

19
Q

Analysing Client Circumstances - Income and Expenditure

A

Compare over 12 months average
Be clear on tax position, allowances etc.
Must flag any affordability concerns and/or shortfalls

Earned income = salary, bonuses etc.
Unearned income = dividends, interest, rental etc.

20
Q

Analysing Client Circumstances - Net Spendable Income

A

Income - Expenditure

21
Q

Analysing Client Circumstances - Changes in Cash Flow

A

Forecasts must include time value of money

Marriage = wedding costs, combined assets
Children = school fees, clothing
Divorce = splitting assets, income changes

Retirement = lower income, drawing down

Disability = lower/no income, higher costs
Death = beneficiaries, inheritance
22
Q

Establishing Priorities and Objectives

A

Break down into short, medium and long-term
Goals must be SMART
Objectives must be prioritised by feasibility and affordability

23
Q

Analysing Existing Financial Arrangements

A

Must highlight gaps to achieving objectives with current plan
Must assess suitability of existing products

Consider current risks e.g. no money for dependants

Be aware of tax statuses changing

24
Q

Marriage Allowance Transfer

A

Can transfer £1,250 of personal allowance from basic rate spouse to non-taxpaying spouse

Max tax saving of £252 (20% of £1,250)

Financial Planning and Advice (5 decks)

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