Advice and reccomendations

Question 1

List the financial planning process

Answer 1

ICA PIR

• Identify and quantify the client’s financial objectives
• Collect data and analyse client’s current circumstances
• Analyse options to meet any identified shortcomings
• Prepare a report and meet with client
• Implement the plan
• Review regularly in lights of changed client circumstances, objectives and market conditions

Question 2

How must recommendations be reported back to a client?

Answer 2

• Simple meeting
• Strategic report and follow up meeting
• Suitability report required (chapter 3, section 3.5)

Question 3

What is asset allocation?

Answer 3

o The mix of underlying asset classes within a portfolio

Question 4

Describe the following in terms of risk - Equities, property, Fixed Interest, Cash

Answer 4

o	Cash (safe) 
o	Fixed interest (relatively safe) 
o	Equities (risk increased) 
o	Property (safe over a long time – long horizon – illiquid)

Question 5

When and only when can specific investment recommendations be made?

Answer 5

in the context of an agreed asset allocation.

Question 6

If applicable when making a fund selection what should be considered?

Answer 6

o	Past performance 
o	Charges 
o	Financial stability of the provider 
o	Stability, independence and standing of:
	Trustees 
	Custodians 
	Auditors

Question 7

When a benchmark is used what should be used?

Answer 7

• Ideally use a neutral, unbiased benchmark that comprises similar investment types
• Must also be ‘investable’ e.g. couldn’t use the FSTE 100 would need to be ‘free float’ adjusted

Question 8

Why are reviews necessary when looking at a clients portfolio?

Answer 8

• Reviews then vital as opportunity to:
o Check for charges to the client’s circumstances
o Monitor investment performance
o Rebalance the portfolio