Chapter 4 - Introduction to Financial Products & Customer Needs Flashcards
Benefit Types
Benefits should be looked at with respect to timing and uncertainty :
- Benefits paid on unpredictable events , both when they might occur or whether they might occur ,eg. car accident
- Benefits certain to occur , but timing unpredictable, eg. death benefit
- Benefits predictable in time , eg. fixed deposit , retirement benefits
- Benefits for immediate consumption
- Benefits from the accumulation of disposal income and capital , eg. pensions and retirement benefits
Describe the main types of social security benefits and financial products and explain how they can provide benefits on contingent events which meet the needs of clients and stakeholders
State benefits include:
- income support due to unemployment (UIF)
- retirement pensions ( eg. grant )
- healthcare benefits ( eg. NHS in UK )
- long term care benefits
- housing support due to low income ( eg. RDP housing )
- Child support ( grants )
Financial products include:
- Insurance ( Life or Non Life )
- Reinsurance
- Pension Schemes
- Benefit Schemes ( similar to pensions but for healthcare , unemployment , etc )
- Investment Schemes
- Derivatives
Explain the main principles of insurance and pensions that impact on these benefits and products.
Insurance Principles:
1. Insurable Interest
2. Pre-funding
3. Pooling or Risk
Describe the ways of analyzing the needs of clients and stakeholders to determine appropriate financial products
Clients have :
- Logical Needs
- maintaining a current lifestyle
- protection
- accumulation for known purpose
- accumulation for a purpose as yet unkown - Emotional Needs
- what they want - Current vs Future Needs
- what will have an impact on current circumstances and living
Most people will not be able to meet all their needs with the amount of money they have and decisions will have to be made as to which needs are met , this decision making will be driven by the individuals attitude towards risk
