Ch 1 & 2: Wealth Management Today & Ethics- 5% Flashcards
KEY TERM: Client Relationship Model
The IIROC CRM Guidelines govern three main areas of client relationships: 1. Relationship disclosure 2. Enhanced suitability 3. Management and disclosure of conflicts of interest
KEY TERM: full-service brokerage
The FSB channel is dominated by the large, bank-owned dealers, which increasingly focus their product and service offering on the HNW segment.
KEY TERM: fully integrated firm
Fully integrated firms include the major banks and some other large financial institutions that offer a comprehensive range of private wealth services. Banks and other deposit-taking financial institutions use the term PWM to describe an integrated set of services offered to HNW clients. In addition, a few major foreign banks offer some domestic services, as well as various cross-border services associated with business units within their global networks.
KEY TERM: mono-line firm
Mono-line firms offer a single set of services, such as discretionary management. This group includes most PIC firms, family offices offering advice only, and other foreign banks. Most PIC firms fall within the mono-line model because they focus solely on investment management. Monoline firms include small, independent, regional boutiques catering to the HNW segment and small not-for-profit organizations. They also include large asset management firms with a national focus. The larger firms might also manage assets for pension plans and sub-advise on mutual funds. Some wealth management firms and institutions, including fund companies and insurance companies, have acquired or built PIC divisions to target the HNW client.
KEY TERM: private investment counsel
Most PIC firms are mono-line firms offering only investment management. Others have broadened their offering to include financial planning, along with trust and estate services. These firms are outside of PWM and focus entirely on the HNW segment.
KEY TERM: private wealth management
Integrated PWM services consist of private banking, investment counsel, and personal trust services offered by the banks and other deposit-taking organizations. It is one of the fastest-growing channels in terms of clients and account balances.
KEY TERM: semi-integrated firm: - offers what? - also known as?
Semi-integrated firms offer a limited range of HNW services. This group includes FSB firms, financial advisor firms, a limited number of foreign banks, and a few PIC firms that provide financial planning or trust services. Semi-integrated offerings targeting HNW individuals and households are becoming a core part of the business activities of leading FSB firms and some other large firms in the financial advisory channel. The FSB channel, particularly at the bank-owned firms, has aggressively turned its attention toward the higher end of the retail market to maximize profitability. Because of this shift in focus and the extensive national coverage enabled by the network of FSB offices, it is estimated that 78% of all HNW households, or a little more than 500,000, have a relationship with at least one FSB firm.
Name 3 Key Trends Shaping the Future
1) changing demographics - investors & advisors 2) competitive pressures - btwn channels, in mass market, fee pressure 3) technological changes - robo-advisors, cryptocurrencies, information availability.
The 9 competencies of an FA can be broken into 2 domains.
- What are the 2 domains?
Professional /General Practice Competencies:
- CRM
- evaluate and connect to actionable plans
- SRG forcomprehensive services
- market/build busines- unique value proposition
Technical Competencies:
1.
Professional/General Practice Competanicies of successful FAs are …?
(they are discussed b-4 the technical competancies)
1- CRM- client relationship (build and manage)
2- Evaluate needs/goals and connect to actionable plans
3- Build strategic SRG to offer full service
4- create unique value proposition and build/market business
Technical Competencies of Successful FAs are …?
(implementing industry specific knowledge)
- Accumulation strategies- AA/asset location, advise/monitor.
- Business planning
- Preservation of opportunities - tax minimization/ insurance/trusts
- Conversion strategies - into income
- Transfer/Legacy - charity/ tax-efficiency/multi-gen plans
What Emerging Soft Skills are becoming increasingly important for FAs to be successful?
- re: Changing Demographics - staying relevant by becoming Transition Specialists, implementing current tech, bringing in younger FAs.
- Building SRG of diverse specialists
- Coaching clients to self-fulfillment
Describe the steps (in order) of the Wealth Management Process.
- Understand: set stage, build rapport, emotional discovery, financial discovery
- Formulate plan: options/ choices to move from current picture to where they want to be- based on needs, objectives and constraints
- Formulize and Implement plan: 2 docs, a) fin pyramid/path ($ value and target date), b) investment plan
- Monitor: Review, report, rebalance, revise the plan: according to life changes
Right vs Wrong situations DO NOT create ethical dilemmas.
Name the 4 tests you can use to identify Right vs Wrong situations.
- Legal test
- Smell test
- Front Page test
- Mom test
Easy decision when: - clearly illegal - lacks basic truth - neg. consequences far outweigh pos results - one choice doesn’t conform to commonly held values that define right from wrong.
Name the 4 primary ethical delemmas - Right vs Right.
- Integrity: Truth vs Loyalty
- Societal: Individual vs Group
- Goal-Based: Short-term vs Long-term
- Fairness: Justice vs Mercy
