Chapter 1 - Investment advice process

Question 1

Client categories

Answer 1

• retail
• professional - many be per se (automatically categorised as such, or elective, retail client elected to be treated as professional)
• ​eligible counterparty

Question 2

critical yield

choices

Answer 2

• shortfall risk - return on an investemnt will not meet their objectives
• achievement of target is dependent on level of invetsment and rate of return. critical yield is the rate of return required based on their investemnt fund

choices to accept to meet target

• higher degree of risk with the possibility of underperforming
• lower target fund
• need to invest more now or in the future