Chapter 2: UK Financial Services and Consumer Relationships Flashcards
Which of the following is FALSE regarding credit cards?
A. The true cost of credit is known as the APR - Annual Percentage Rate
B. They may be useful in emergencies
C. They are often used to pay upfront and pay off the balance in smaller instalments
D. They are often used for convenience purposes
A. The true cost of a credit card also includes late fees, over-limit fees and annual fees.
In the marketing ideal there is an age group referred to as ‘empty-nesters’, where people enjoy freedom from dependents and relative affluence. In reality, this is not always the case. Which of the following is LEAST likely to spoil this golden age?
A. Adult children living at home due to difficulties of getting on the property ladder
B. Property prices recently fallen in value
C. School fees to pay
D. Caring for elderly parents
C. School fees will not be an issue for an ‘empty-nester’.
You are a financial advisor who only provides advice on a single product provider’s products. Which of the following is NOT true?
A. You are an agent of the provider
B. You are an agent of the client
C. You must disclose your status to the client
D. You are ‘tied’ to a single provider
B. Only an Independent Financial Advisor (IFA) is an agent of the client. Advisors who are ‘tied’ or ‘multi-tied’ are agents of the providers.
Which of the following is TRUE regarding term life assurance?
A. Stays in force during the policy holder’s life
B. The payout may rise with inflation during the life of the policy
C. The payout is made at regular intervals on death
D. Usually more expensive than whole-of-life policies
B. The payout may rise with inflation during the life of the policy.
Whole of life (WOL) policies are usually more expensive and stay in force for the insured’s life.
The ‘payout is made at regular intervals on death’ describes a FAMILY INCOME BENEFIT (FIB) insurance policy.
Which of the following is NOT true of a Self-Invested Personal Pension (SIPPs)
A. The scheme provider must be the trustee of the assets
B. Not all assets are HMRC approved within a SIPP
C. HMRC allow a greater range of investments to be held in a SIPP than a personal pension plan
D. Some assets within a SIPP may be subject to tax
A. In a SIPP the member may have ownership of the assets (via an individual trust) as long as the scheme administrator is a co-trustee.
A company becomes insolvent and the creditors appoint a receiver to take control of only one of the company’s assets. What kind of receiver is this?
A. Administrative receiver
B. Attorney receiver
C. Voluntary receiver
D. Fixed charge receiver
D. Fixed charge receiver.
In the UK, receivership falls in two two types:
1. Administrative receivership - where the receiver assumes control over most or all the assets of a business.
2. Fixed charge receivership - in these instances, the receiver controls usually a single property.
All of the following are true of provider platforms, EXCEPT:
A. They are services used by intermediaries and sometimes consumers directly
B. They are used to view and administer investment portfolios
C. They are remunerated either by an explicit fee or a share in the product charges
D. They do not include fund supermarkets
D. Provider platforms include wraps and fund supermarkets. Fund supermarkets are online services that sell products directly to consumers.
Harold wishes to set up a trust to protect a portion of his assets for his children once he and his wife, Sharon, have died.
Which of the following trusts would allow Sharon to continue to benefit from the income on the assets after Harold’s death and give his children absolute vested interest in the assets after Sharon’s death?
I Bare trust
II Interest in possession trust
III Power of appointment trust
IV Discretionary trust
A. I only
B. I and II
C. II only
D. II and IV
C. Interest in possession trust only.
An interest in possession trust would give the remaindermen (Harold’s children) absolute vested interest, after the life interest (Sharon) has ceased to benefit.
The bare trust gives the beneficiaries the ability to access the assets whenever they wish once they have reached 18 years old.
The other two trusts rely on the powers of the trustee: either in a powers of appointment trust where the trustees choose whom they appoint as beneficiaries (at which point they gain absolute vested interest) or a discretionary trust where the trustees choose when (if) and to whom they distribute the assets (where there will be no absolute vested interest).
Which of the following is true regarding specialist investments?
A. They include shares and bonds
B. They are often fairly illiquid
C. They are best suited to low income investors
D. They should make up a high proportion of a client’s portfolio
B. Specialist investments are often fairly illiquid.
Specialist investments include property, timber, antiques and wine.
