Chapter 3 - Investment Planning Flashcards
What is an investment policy statement?
A summary of the client’s objectives which covers, returns, risk and constraints.
Manager operates under the guise of an IPS to achieve client goals
What is included in a investment policy statement?
1) Objectives
2) Risk Profile
3) Liquidity Requirements
4) Time Horizon
5) Tax Position
6) Strategy
7) Asset Allocation
8) Constraints
9) Benchmark
What is the purpose of an IPS?
To summarise a client’s investment stratety
and to provide constraints under which the manager will operate
What two main types of investment funds are there?
1) Fund of Funds
2) Manager of Mangers
What is a manager of managers fund?
Multiple managers appointed to manage each asset class / geographic region
Give one pro and one con of MoM funds.
+ May be cheaper
- Exit may be complicated / time consuming
What is the difference between fettered and un-fettered funds?
Fettered - only invest in funds by one management company
Un-fettered are unconstained
Pros of fettered FoF investing?
1) Lower costs
2) no double charging
3) better understanding of funds
Pros of un-fettered FoF investing?
1) less constraints
2) better returns (potentially)
3) better diversification
What is a centralised investment proposition?
1) Portfolio service such as a model portfolio
2) Discertionary management where adviser has some input into strategy
What do the FCA say about CIPs?
centralised investment propositions
Acceptable uses, but firms must ensure they are not being used as “one size fits all approaches”
What is stochastic portfolio management?
Incorporates information on client (e.g. risk profile)
Inputs this into a model / software which maps out all the potential outcomes by including a variety of inputs (e.g. rates & inflation) to model all potential returns.
1) useful for annuities (see if enough is being paid in / will be available for retirement)
2) Useful for court of protection to see if a lump sum will last.
What is philanthrophy?
Donating of money, goods, services, time and effort to support a socially beneficial cause.
beyong impact investing - expect no financial return
What technical questions should a wealth manager ask re: a client wanting to be philanthropic
1) How much
2) How is it being funded? (income / capital)
3) Tax status and how can the client benefit
4) Make donation now or on death
5) is it on going or one off
Should be more than just technical / tax related
What non-technical questions should be asked: re philanthropy
1) What cause do you want to donate to?
2) What do you want to achieve?
3) How will you measure your contribution
4) Do you want personal recognition
5) Does a charity already exist or do you need to set up a charitable trust?
6) Do you want personal involvement, or just to donate?
What are the properties of a benchmark?
SAMURAI
1) Specified
2) Appropriate (to fund)
3) Measureable
4) Unambigous
5) Reguarly reported
6) Appropraite (to currency)
7) Investable
