Chapter 8 (4 exam questions) Client Advising Skills

Question 1

What different types of documents can be used with clients?

Answer 1

Question 2

What documentation must be provided for the following products Investments, General Insurance and Mortgages

Answer 2

Question 3

Why were Key Information Document performance scenarios was removed?

Answer 3

They were based on past or projected performance and therefore did not meet the FCA’s requirement of being clear, fair and not misleading.

Question 4

Summary of 8.1

Answer 4

Question 5

What is the purpose of a fact find?

Answer 5

To establish all the relevant information required to assess customer needs and make suitable recommendation to meet those needs.

Question 6

Answer 6

Question 7

QUESTION

Answer 7

Answer = closed questions

Question 8

SUMMARY OF 8.2

Answer 8

Question 9

Answer 9

REMEMBER AS ‘PIPSI’

Question 10

Answer 10

Question 11

question

Answer 11

Question 12

What is ‘negative screening’ , ‘positive screening & a ‘neutral approach’ when formulating and providing a recommendation?

Answer 12

Negative screening (also called avoidance) - Where the advisor avoids certain practices, such as any firm that is involved in the arms trade.

‘Positive screening - where an advisor actively seeks out firms that endeavour to be as ethical as possible.

‘Neutral approach - where an advisor chooses firms that are considered ‘socially responsible’

The advisor will do any of the above in response to their clients ethical views
The above can be shown by the company’s Environmental, Social and Governance (ESG) practices.

Question 13

Single premium policy and Multi-Premium Policy rules

Answer 13

Question 14

Answer 14

Question 15

Summary of 8.3

Answer 15

Question 16

A recommendation can be presented orally only. True or false

Answer 16

FALSE

A recommendation can be in any form. It can be presented orally or written or both

Question 17

When is a suitability report not required?

Answer 17

It is not required for products NOT viewed as regulated activities such as NS&I and stakeholder products which follow a basic advise process

Question 18

If a client is given further advice within 12 months of initial contact, what is the requirement regarding a fact find?

A new fact find must be completed at all advice meetings.

As it is within 12 months, the old fact find stands and does not need amending.

The adviser should ensure that the original fact find remains correct before advising.

A fact find codicil must be completed stating the amendments made.

Answer 18

The adviser should ensure that the original fact find remains correct before advising.

A new fact find is not required, but questions must be asked to determine if anything has changed. (FIND OUT IF ANY 12 MONTH RULE APPLIES)

Question 19

Why are open questions important when gathering information?

To allow the client to express their own thoughts, views and opinions.

Documented evidence that open questions have been asked are a regulatory requirement.

To ‘even up’ the conversation.

They remove the need for additional questionnaires

Answer 19

To allow the client to express their own thoughts, views and opinions.

Open questions provoke thought and get important facts from a client such as aims and objectives.

Question 20

An IFA has a married couple as their clients. The couple are now divorcing. What action should the IFA take in relation to future advice?

Refuse to transact business with either party.

Continue to do business with both, but keep each informed of the other’s actions.

Continue to do business with both while operating strict confidentiality.

Refer one of the clients to another IFA.

Answer 20

Continue to do business with both while operating strict confidentiality.

The IFA can continue to do business with both parties, as long as strict confidentially is maintained.

Question 21

According to the priority order of financial planning needs, which of the following has the highest priority?

Income protection.

Pensions.

Savings.

Protection.

Answer 21

Protection.

PIPSI – Protection, Income protection, Pensions, Savings, Investments is the recognised priority order.

Question 22

An IFA has seen a client and made some financial recommendations. The client does not wish to proceed with any of these and asks the IFA to transact another product. What should the IFA do?

Try and persuade the client to take their advice.

Refuse to do business with the client.

Provide a suitability report for high-risk products even though this is execution only.

Document recommendations made and client’s decision/reasons for not taking the advice.

Answer 22

Document recommendations made and client’s decision/reasons for not taking the advice.

This is the best answer of those given. The IFA could refuse to transact business, but this is probably a bit extreme in the circumstances.