Chapter 2 Flashcards
1
Q
- Janey met with her financial adviser to discuss, among other things, her budget for
protection needs. When considering Janey’s expenditure, how should it be
categorised?
A. Essential, every day and occasional spending
B. Regular and irregular spending
C. Essential and non-essential spending
D. Priority and non-priority spending
A
A
2
Q
- Which of the following is a key consideration for those entering the commercial buy to-let
property market?
A. Commercial buy-to-let mortgages are only available for those that already own property
B. Commercial buy-to-let investing should only be viewed over the short to medium term
C. Commercial buy-to-let mortgages have more consumer protection if things go wrong
D. Commercial buy-to-let mortgages are not regulated by the Financial Conduct Authority
A
D
3
Q
- Your client, Jayden, is surprised that he is not able to protect his full income in the event of
illness. Why do most insurers limit the amount of benefit they will provide
under Income Protection policies?
A. It is a restriction enforced by HMRC legislation
B. They need to account for the income tax and National Insurance liability
C. To prevent the individual getting more income than they would by working
D. To account for future increases in the rate of inflation
A
C
4
Q
- At Henry’s forthcoming financial review, his adviser wishes to discuss his flexible whole
of life policy. Why do these policies need to be reviewed regularly?
A. To ensure the premiums are sufficient to sustain the required level of cover
B. To give the client regular opportunities to review the underlying investment funds
C. To allow the life company to respond to any changes in mortality assumptions
D. To allow the life company to add the applicable reversionary bonus
A
A
5
Q
- Why might Harriet, a 27-year-old working mother of two young children, consider
reviewable critical illness cover?
A. If she believes her family situation might change in the future
B. It allows her to convert to an income protection policy on review dates
C. If she believes her morbidity risk would reduce in the future
D. Premiums are considerably cheaper than a guaranteed premium policy
A
D
6
Q
- Following the Pensions Act 2014, the State pension age is expected to be reviewed at least
every:
A. 6 years
B. 5 years
C. 3 years
D. 2 years
A
B
7
Q
- Gregor is a member of his firm’s defined benefit scheme. What are the main features of a defined benefit pension scheme?
A. Individual member’s funds can be identified within the scheme
B. A fund administered by trustees where the pension is earnings related
C. Pensions received in retirement are investment related
D. Employers always know what the cost of providing the scheme will be
A
B
8
Q
- You are reviewing the financial planning needs of a young couple, Simon and Jess, with two
children under the age of 5. What would your general priorities be for them before they
considered saving and investment?
A. Pay off all debts and put any required protection plans in place immediately
B. Pay off expensive debts, protect the family, then put an emergency fund in place
C.Complete an income and expenditure analysis to determine any surplus income
D. Put anemergency fund and protection in place first
A
B
9
Q
- What is the difference between gilts and corporate bonds?
A. Corporate bonds are guaranteed as they are government backed, but gilts offer no such guarantee
B. Gilts are always bought and sold at their nominal rate, whereas corporate bonds are traded on the bond market so could be bought or sold for less than £100
C. Gilts are loans to the government, whilst corporate bonds are loans to companies
D. Corporate bonds pay interest to the investor, whilst gilts pay no interest
A
C
10
Q
- You have been discussing fund management styles with one of your clients. Which of the following is accurate regarding actively and passively managed funds?
A. Passive funds aim to track the market in which they operate, and active funds aim to outperform it
B. Passive funds are always classed as lower risk than active funds
C. Active funds will always have higher returns and lower charges than passive funds
D. Passive funds are only available through open ended investment funds
A
A
11
Q
- If Elizabeth makes a potentially exempt transfer as part of her plan to mitigate the inheritance tax due on her large estate, which of the following should she be aware of?
A. The gift must be irrevocable to be effective
B. Tax may be payable at the outset
C. She needs to survive 10 years before it falls outside of her estate
D. It must be within the nil rate band of £325,000 to be effective
A
A
12
Q
- Clay, a higher rate taxpayer, has come to you for advice. Which of the following would NOT normally be recommended as a tax planning strategy for him?
A. Consider a higher risk investment like an EIS just to qualify for the tax relief
B. Consider taking maximum pension commencement lump sum from a pension when the client’s sole requirement is income
C. Delaying investment to qualify for an allowance, e.g. splitting an investment to straddle two tax years for an ISA investment
D. Delaying or bringing forward transactions so that they fall into certain tax years
A
A
