4: sayls proseso Flashcards
Understanding The Client
→ Objective
→ Investment Horizon
→ Risk Appetite
→ Knowledge & Experience
What To Emphasize To Clients
- Nature and Investment Objectives
- Participation: Admission and Redemption
- Manner of Operation
- Valuation of the Fund
- Powers of the Trustee
- Rights of Participants
- External Audit
- Amendments & Termination
- Taxation
- Risks
1. Nature and Investment Objectives
____________ of the fund, i.e. a UITF and if it is a feeder fund or a fund of fund.
The fund is a ______ product and not a __________ product
The fund’s investment _____________ and ________, including _____________, if any
________________ of the fund – to which risk profile the fund applies to
____________ of the kind of investments/securities that will be purchased by the fund
________________ of the fund
______________
Structure
trust; deposit
objectives; policies; limitations
Risk profile
Description
Base currency
Holding periods
2. Participation: Admission and Redemption
Contributions always through _____ of participation; each unit shall have ______________ and privileges as any other unit in the same fund.
_____________ and ___________ shall always be based on prevailing NAVPU of the fund.
_______________ and ___________ for subscriptions and redemptions.
Policy on suspension of ________ calculation, subscription and redemption.
________________________________ prior to admission into the fund.
units; uniform rights
Subscriptions; redemptions
Trading frequency; cut-off times
NAVPU
Client Suitability Assessment (CSA)
3. Manner of Operation
Trustee has _____________________ and _________ over the fund; Trustee has full ______________ powers over investments of the fund limited only by stated investment objectives and policies of the fund.
_____________ accounting
_____________________ of return or income
______________________ — any income or loss shall be for the account and risk of the Participant.
Trustee __________ for losses unless upon willful default, bad faith or gross negligence.
exclusive management; control; discretionary
Pooled-fund
No guaranteed fixed rate
Non-coverage by PDIC
not liable
4. Valuation of the Fund
________________ valuation
Possibility of ______ upon redemption even if the underlying investments have not been _____.
_____ and _______ of the fund; feeder funds and fund-of-funds may be subject to _____________ arising from the layered investment structure.
Trustee may charge the fund for other ________________ incurred by it in the management of the fund (e.g. attorney’s fee, custody fee, external audit fees).
Marked-to-market
loss; sold
Fees; expenses; higher fees
qualified expenses
5. Powers of the Trustee
In the case of feeder funds and fund of funds, the Trustee may change the __________.
Trustee may temporarily ________ NAVPU calculation, subscriptions and redemptions.
target fund/s
suspend
6. Rights of Participants
Copy of ______ available upon request of Participant
List of existing and ____________________ shall be made available to
Participants
Disclosure of ____ thru the _______________________
Rights in case of ____________ of the fund, i.e. pari-passu and pro-rata
Plan Rules
prospective investments
Risk; Risk Disclosure Statement (RDS)
termination
7. External Audit
The fund shall be audited ________ by an _____________________ acceptable to the BSP.
Results of the audit will be made available to ___________.
Audit to be conducted by the ________________ engaged for the audit of the trust entity.
annually; independent external auditor
Participants
same external auditor
8. Amendments & Termination
Amendments to the Plan Rules or termination of the fund shall be approved by the ______________________________________.
Approved amendments shall be submitted to the ____ within _________________ from approval.
Participants shall be informed of such _____________ and will be allowed to _________ their participation units within ___________ before the changes are implemented, unless shorter notice period is provided for in the Plan Rules.
Basis upon which the fund may be __________.
Board of Directors of the Trustee
BSP; 10 business days
amendments; withdraw; at least 30 days
terminated
____________ of the fund shall be based on prevailing tax laws and regulations.
- Taxation
It is the Trustor/Participant who bears the inherent risks.
- Risks
DECLARATION OF TRUST is a…
written plan rules (Plan) in the form of a ____________
approved by the ______ entity’s Board of Directors
copy submitted to the ____ for prior _________
copy of the Plan made available at the principal office of Trustee for Inspection by any person having an __________ in the fund or by his _______________.
trust agreement
Trust
BSP; approval
interest; authorized representative
Minimum Elements of a Declaration of Trusts
a) Title (Product/brand name)
b) Investment objectives and policies
c) Investment powers of Trustee
d) Unitized NAVPU valuation methodology
e) Terms and conditions governing the admission or redemption of units of participation
f) External audit requirements
g) Basis to terminate Plan
h) Trustee Liability Clause
i) Fees and allowable charges
j) Benchmark against which the performance of the fund will be measured
k) Other matters affecting rights of participants in Plan
Minimum Elements of a Declaration of Trusts
a) Title (Product/brand name)
b) Investment objectives and policies
c) Investment powers of Trustee
d) Unitized NAVPU valuation methodology
e) Terms and conditions governing the admission or redemption of units of participation
f) External audit requirements
g) Basis to terminate Plan
h) Trustee Liability Clause
i) Fees and allowable charges
j) Benchmark against which the performance of the fund will be measured
k) Other matters affecting rights of participants in Plan
UITF Selling
Marketing Collateral:
Printed marketing materials must clearly provide name and classification of fund
Clear explanation of the general risks of investing in UITFs, as well as the risks specific to a type of fund; all in layman’s terms
Administrative and marketing details i.e. pricing cut-off times
All charges to be made against the fund
A statement that the participation is not a deposit account and is not insured by the PDIC
A balanced assessment of potential gains and losses; that
An advisory that investors must make own assessment of seek professional opinion as necessary
Do’s and Don’ts:
For UCP Marketing Personnel in Selling UITFs
_ Is expected to properly explain to prospective UITF investors the important features of a UITF
_ Explain the investment risks when investing in a UITF.
_ Marketing UITFs as a deposit product
_ Promising or guaranteeing a rate of return or income.
_ Properly profile the client to ensure that they are only investing in the proper funds
✓ Is expected to properly explain to prospective UITF investors the important features of a UITF
✓ Explain the investment risks when investing in a UITF.
✘ Marketing UITFs as a deposit product
✘ Promising or guaranteeing a rate of return or income.
✓ Properly profile the client to ensure that they are only investing in the proper funds
Classification of Clients
- Conservative
- Moderate
- Aggressive
Client wants to ensure preservation of capital at all times. prefers investment products with minimal risk and short investment horizon, and is best suited for deposit products only.
Conservative
Clients intends to settle for returns on investments that is higher than the regular deposit products, and is aware that a higher retun is accompanied by higher level of risks. Clients is willing to expose the funds to a certain level of risks in consideration of higher returns.
Moderate
Client wants capital to appreciate over time and willing to accept higher risks involving volatility of returns and even possible loss of investment in return for potential higher long-term results.
Aggressive
Recommended Investment Holding Period
→ Money Market Funds:
→ Fixed Income:
→ Multi Asset Funds:
→ Equity Funds:
→ Feeder Funds:
→ Fund of Funds:
→ Money Market Funds: 1 Year
→ Fixed Income:
Internediate: 1-3 Yrs
Medium: 3-5 Yrs
Long-term: 5Yrs or more
→ Multi Asset Funds: 3-5 Years
→ Equity Funds: 5 Years or more
→ Feeder Funds: 3-5 Years
→ Fund of Funds: 3-5 Years
Client factors that determine the suitability of each type of UITF:
S.H.O.R.E.
S IZE/ CAPABILITY TO INVEST
H ORIZON (TIME HORIZON)
O BJECTIVE (INVESTMENT OBJECTIVE)
R ISK- RETURN PROFILE
E XPERIENCE (INVESTMENT EXPERIENCE)
SIZE/ CAPABILITY TO INVEST
• Has enough funds to invest in the product
• Liquidity- the need for immediate cash conversion w/out the risk of principal loss
• Idealistically, excess funds
HORIZON (TIME HORIZON)
• When does the client need the cash?
• Anytime? Next month? Next year 20 years from now?
OBJECTIVE (INVESTMENT OBJECTIVE)
• Capital Appreciation
• Capital Preservation
RISK- RETURN PROFILE
• Risk Tolerance of the investor (Risk Averse / Risk Seeker)
Client Suitability
To be accomplished by the client prior to making any investments in _______.
Guide for _______________ to recommend appropriate _____________________ to the client.
Should be updated at least _________ or whenever there are changes to the _____________________, __________________________.
To be signed by _____ the _____ and the _______________________________.
If a client wants to invest in a UITF with higher risk profile than the _____________ based on the ____, client needs to sign a _________________.
UITFs
account officers; investment outlets
every 3 years; client’s investment objectives; financial circumstances or requirements
both; Client; Certified UITF Sales Personnel
resulting risk profile; CSA; Waiver of CSA Profile
a document intended to provide UITF participants with key information and disclosures to facilitate better understanding and comparison of UITFs offered by trust entities (TEs).
Key Information and Investment Disclosure Statement (KIIDS)
KIIDS shall contain the following disclosures in CAPITAL LETTERS and in BOLD font:
→ THE UIT FUND IS NOT A DEPOSIT AND IS NOT INSURED BY THE PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC).
→ RETURNS CANNOT BE GUARANTEED AND HISTORICAL NAVPu IS FOR ILLUSTRATION OF NAVPu MOVEMENTS/ FLUCTUATIONS ONLY.
→ WHEN REDEEMING, THE PROCEEDS MAY BE WORTH LESS THAN THE ORIGINAL INVESTMENT AND ANY LOSSES SHALL BE SOLELY FOR THE ACCOUNT OF THE CLIENT.
→ THE TRUSTEE IS NOT LIABLE FOR ANY LOSS UNLESS UPON WILLFUL DEFAULT, BAD FAITH OR GROSS NEGLIGENCE.
Some Investment Strategies to help UITF clients
Diversification
Life Cycle Based Investing
Cost Averaging
Goals Based Investing
Cashflow/ Horizon Matching
building a portfolio with a variety of investments that have different expected risks and returns aimed at minimizing risks and losses affecting one asset. “Do not put your eggs in one basket.”
Diversification
programs investments accordingly to meet the different life stage needs.
Life Cycle Based Investing
investing the same fixed amount in the same investment over a period of time.
Cost Averaging
investment strategy that focuses on meeting personal financial goals.
Goals Based Investing
matching of coupons, dividends, maturities to meet cash outflows (i.e. financial obligations) over a given time horizon
Cashflow/HorizonMatching
