10. The Regulatory Advice Framework Flashcards
What are the 3 customer categories and their relative protection provided?
- Eligible counterparty; financial institutions/government requiring simple execution. Lowest protection. Client can elect to be in this category
- Professional client; as above but requiring higher level of service. Advisers can assume adequate knowledge + experience. Higher protection.
- Retail; everyone else. Highest protection
What are the 4 drivers of vulnerable customers?
Health conditions/illness
Life events
Resilience; ability to withstand shocks
Capability; knowledge/confidence
What are the 3 main fiduciary duties for firm / adviser?
Duty of care
Confidentiality
Primacy of customer interests
Who can give regulated advice and what are the 3 requirements?
Can only be given by authorised firms with specific permission
- Must be a recommendation made to (potential) investor/agent
- Recommendation must relate to buying/selling/retaining/exercising rights of an investment
- Must be presented as suitable based on their circumstances
What are the features of “guidance” advice and who can give it?
Given by authorised firms without specific permission to give regulated advice
Can provide objective information but not opinion/advice
Can help customers identify + understand options
Unregulated firms can give facts + generic details only
Describe the 3 types of streamlined advice?
Focused; personal recommendation at client’s request for specific need or investment/asset. Advice must be suitable
Simplified; personal recommendation for specific need but firm sets out limited nature of services. Designed for customers who:
- already met priority needs
- have income/capital to invest
- don’t want holistic assessment
Basic; pre-scripted questions to assess suitability of products. Establishes broad priorities. Provides a suitable recommendation, not the most suitable
What are the 2 scopes of advice?
Independent; whole of market
Restricted; limited providers
What should be included in initial disclosure information (8) and when should it be provided?
Provides in “good time” before doing business
Name, address, contact details of firm
Methods of communication
Statement of FCA authorised + regulated
Type of service (independent/restricted)
Nature/frequency/timing of performance reports
Method of performance evaluation for managed investments
Costs + fees
Info about FSCS if applicable
Client agreement:
Which products
By when must it be given
How long should records be kept
Investment management or futures/options - not packaged investments, pensions and life policies
Provided before earlier of client being bound by agreement or services being provided
Must keep record for duration of client relationship - indefinitely for pension transfers/opt-outs/additional voluntary contributions
What due diligence should be done on a product? (6)
Nature
T&C’s
Underwriting requirements
Available term(s)
Investment options
Exclusions
What due diligence should be done on a provider? (5)
Financial strength
Standards of customer service
Claims record
Fund performance/consistency
Reliability / accuracy of marketing - independent assessment of risk is preferable
What should be included in a key features document (5) and when should it be provided?
Type of product and key features
Risk factors + potential return
Product T&C’s
Costs + charges
Complaints info
Provided before sale is concluded
What are PRIIPs and what info should be provided to the client (4)?
Products featuring direct/indirect investment in capital markets or where repayment is linked to securities/benchmarks
Must provide Key Information Document:
Up to 3 A4 pages
Quantitative summary risk indicator (market + credit)
3 performance scenarios
Stress scenario
What are the rules of adviser charging (7) and when do they apply?
Apply to advice + personal recommendation on retail investment products (investments, life assurance, pensions)
Can charge for arranging/executing transaction, admin services, relationship management
Cannot request/accept commission from client
Cannot earn commission from provider
Not variable by provider/product (prevents bias)
Clear charging structure
Disclosed in writing before providing service
Ongoing charges only with ongoing service (excl regular contributions)
Can accept minor non-monetary benefits if in best interests eg product info, conferences (incl hospitality)
What are the cancellation periods for:
Life assurance, annuities, pensions, lifetime ISA, pure protection insurance
Investments, S+S ISA, Cash ISA
And when does it start?
Life assurance, annuities, pensions, lifetime ISA, pure protection insurance - 30 days
Investments, S+S ISA, Cash ISA - 14 days
Starts when contract is concluded or when client receives T&C’s if later
