Advice Flashcards
What are benefits of advice?
Financial objective & priorities identified
Budgeting/cashflow
Identify ATR & Capacity for loss
Benefit from adviser research
Suitability review of existing arrangements
Tax planning - use of wrappers
Recommendations/Financial plan
Dealing with professionals
Ongoing service/Reviews
Consumer protection/regulated advice
4 Benefits of paying adviser fees on hourly cost basis
Familiar or same as other professionals
Easy to understand and compare
Based on actual work undertaken
Fee cap can apply
4 drawbacks of paying adviser fee on an hourly basis
Paid from personal funds
Can be seen as inefficient or adviser running up clock
Unknown total cost
May put clients off making contact or asking for advice
4 Drawbacks of paying adviser fees as a fund based fee
Difficult to predict each year
May not be in line with service provided, not reflecting time spent or larger portfolios not generally harder to administer
Extra charges may apply for other services
Reduces potential investment growth
4 benefits of paying adviser fees as a fund based fee
Can negotiate lower fees for larger investments
Payment via provider is not from personal funds
Attractive for lower amounts
Incentive to grow funds the higher the value the more the manager can earn
4 benefits of paying adviser fees on a fixed fee basis
Known cost
Familiar or same as other professionals
Easy to understand and compare
Amount invested is irrelevant- cheaper for larger sums
4 drawbacks of paying adviser fees on a fixed fee basis
Paid from personal funds
Hard to see if time spent justifies amount.
Hard to see what work has been included
May put client off making contact or asking for advice
What is the process to be followed when providing appropriate advice
- Fact Find/establish Risk profile
.confirm scope of services and fee - Analyse existing investments/position
- Develop financial plan
- Present financial plan
- Provide suitability report
- Implement plan
- Monitor and review
Identify client factors that would influence a clients attitude to risk?
Timescales/Age
Health/family health/life expectancy
Current income & Expenditure
Existing Assets/Liabilities
Income & Capital requirements
State pension/benefits
Investment experience/knowledge
Objectives
Economic & market conditions
Explain the importance of reviewing attitude to risk on a regular basis
ATR differs for different objectives
Changes based on investment experience/knowledge
Changes to personal circumstances/Health
Changes based on income/future inheritance
Changes as they get older
Investments should match ATR
How much risk do they need to take
What are the key area an adviser needs to consider when understanding risk with a client?
Capacity for loss - can client absorb loss
Tolerance - are they willing to take some risk, do the have a time long horizon
Perception - do the have an opinion based on proper knowledge and experience
What factors should be considered and process that should be followed when recommending a fund switch
KYC
ATR
Time horizon
Charges
Performance
Fund choice
Asset allocation
Select fund to match ATR
Present recommendation
Obtain acceptance
Obtain signed documentation
