Chapter 8 Flashcards
- Which three providers of government guidance have been brought under the single financial guidance body the Money and Pensions Service (MaPS)?
A. The Money Advice Service, the Pensions Advisory Service and the Pensions Ombudsman
B. StepChange, Pension Wise and the Pensions Advisory Service
C. Pension Wise, Citizens’ Advice and the Money Advice Service
D. The Pensions Advisory Service, the Money Advice Service and Pension Wise
D - The Money and Pensions Service brings together the Pensions Advisory Service, the
Money Advice Service and Pension Wise.
- What is the name of the free and impartial service set up by the Government to help
individuals understand their pension choices since April 2015?
A. Treating Pensions Fairly
B. Pension Wise
C. Money Advice Service
D. Money Wise
B - Pension Wise is the service that offers help to the public to understand their pension choices.
The Money Advice Service offers more general help to the public on all financial issues not just pensions. Answers a) and d) are not government-run services.
- What is the difference in legal status between an IFA and a representative of a product provider?
A. A provider’s representative is the agent of the provider, an IFA is the agent of the client
B. A provider’s representative can only be self-employed whereas an IFA can be a
sole trader, partnership or limited company
C. A provider’s representative can only offer advice in one product area, whereas an IFA can offer advice from across the financial services spectrum
D. A provider representative acts as an introducer only, an IFA is authorised to advise
A - Legally, an IFA is the agent of the client, whilst a representative of a provider is the agent of the provider. A representative of a provider can be employed by the provider and can offer advice (not just act as an introducer) across all the provider’s products, not just one product area. They are restricted to offering advice on products from the single provider they are representing.
- Unsolicited real time financial promotions are often termed:
A. direct offer promotions
B. advertisements
C. directive rules
D. cold calling
D - Cold calling is another term used for unsolicited real time financial promotions.
- What was one of the aims behind the introduction of stakeholder products?
A. To improve industry persistency rates
B. To improve access to financial services for those on low incomes
C. To reduce commission bias
D. To improve consumer knowledge of the financial services industry
B - Stakeholder products were introduced to enable firms to provide simpler and lower-cost advice to consumers, i.e. to make advice more accessible to those on lower incomes.
- Which of the following is a difference between a ‘real time’ promotion and a ’non-real time’ promotion? Tick all that apply.
A. Real time promotions are interactive dialogue
B. Generally, a non-real time promotion is equivalent to a non-written financial
promotion
C. Generally, a non-real time promotion is equivalent to a written financial promotion
D. A real-time promotion would be expected to have a shelf life
A, C - The FCA define a ‘real time’ promotion as a promotion made via a personal visit,
telephone conversation or other interactive dialogue. A ‘non real time’ promotion does not involve any simultaneous interactive dialogue e.g. a written promotion. A real time promotion would not be expected to have a shelf life.
- Why is income and expenditure information especially important under the “know your customer rules”? Tick all that apply.
A. To ascertain if the client is able to pay a fee
B. To establish if the client is likely to provide referrals
C. Affordability of recommendations
D. Understanding entitlements to State benefits
C, D - Income and expenditure information is an important part of the ‘know your client’ rules, as it will
have a huge bearing on the affordability of any recommendations. Income will also affect the
client’s eligibility for state benefits. Income and expenditure information may influence if a client is
able to pay a fee but should not be the main consideration, and it is not relevant to the client
providing referrals.
- Which of the following are NOT classed as pure protection policies? Tick all that apply.
A. Unemployment cover
B. Income protection
C. Term assurance
D. Endowment
A, D - Pure protection policies are those that do not have a surrender value (more than the premiums paid), and benefits are payable on either death or
incapacity; hence, a term assurance and
income protection policy are classed as pure protection. Unemployment cover is paid out on redundancy rather than death or incapacity, and an endowment policy has an element of savings and hence a surrender value.
- Client agreements are required for which of the following? Tick all that apply.
A. Direct offer financial promotions
B. Life offices selling life policies as a principal
C. Investment business with a retail client
D. Life offices selling pension policies as a principal
E. Packaged product business with a retail client
C, E - Direct offer promotions and life offices selling life and pension policies as a principal are exempt
from providing client agreements. Most other types of business, including packaged products and investment business with retail clients, do require a client
agreement.
- What must be included within a Client Agreement? Tick all that apply.
A. Regulation by the FCA
B. The IFA’s contact details
C. The FCA’s logo
D. Risk warnings
A, D - A client agreement must include confirmation of regulation by the FCA and risk warnings. The
IFA’s contact details should be supplied during initial disclosure. Authorised firms are no longer able to use the FCA logo on their own materials.
- Which of the following are acceptable limitations to a firm’s expertise? Tick all that apply.
A. Reliance on client information
B. Reliance on a connected firm
C. Limited experience in a particular field
D. Insufficient information
A, D - Acceptable limitations to a firm’s expertise (and hence its ability to provide suitable advice) are: a reliance on the information a client has provided (it is acceptable to rely on this information, unless they are aware it is incorrect); a reliance on others, for example, the necessity to obtain information from unconnected competent third parties; and, if the adviser has insufficient evidence to make a recommendation, in which case the adviser should either decline the business or, if the client insists, proceed on an execution-only basis. If a firm has limited experience, they may be advised to introduce the business to a suitably experienced firm.
- Which of the following financial services products has a 30-day cancellation period? Tick all
that apply.
A. Electing to take income withdrawal
B. Transferring a child trust fund
C. Stakeholder pensions
D. Opening a cash ISA
A, C - Some investments must have a cancellation period, allowing the client to cancel after the sale, the cancellation period is either 14 or 30 days. Answers a), and c) both have a 30-day cancellation period. Opening a cash ISA and transferring a child trust fund both have a 14-day period.
- What key life changes could have an impact on existing and future financial advice? Tick all
that apply.
A. Birth of a child
B. Marriage/divorce
C. Change of employment
D. Reaching 40
A, B, C - There are many life changes that could have an impact on existing financial advice and on future reviews. Some examples of these are: birth of a child, marriage and change of employment. Reaching 40 would not necessarily affect someone’s financial circumstances.
What is customer due diligence?
Verifying the ID of the customer
Obtain information on purpose and intended nature of the business relationship
When might a simplified due diligence check be acceptable?
For low risk transactions
