Client Advice Flashcards
What are institutional investors?
They use fund managers to manage funds on a large scale.
What are examples of institutional investors?
Pension funds, insurance companies, mutual funds (unit trusts and OEICs, hedge funds, charitable trusts and sovereign wealth funds
What is an individual (retail) investor?
These are high networth individuals with an annual income of £100,000 or more and investable assets of £250,000 or more.
What is a certified sophisticated investor?
An individual that is assessed by a firm as being sufficiently knowledgeable to understand the risk is a particular investment
What is the FCA principles for business: principle 6
Pay due regard to the interests of customers and treat them fairly
What is principle 12 that replaced principle 6 and 7?
Firms must act to deliver good outcomes for retail customers.
What are the four outcomes from the consumer duty rules?
- Product and services - firms must develop and design products that are fit for purpose, meeting needs, characteristics of the customers in the identified target market
- Price and value - firms need to ensure their services order good outcomes in terms of price and value. Differential pricing is still allowed.
- Consumer understanding - customers can make informed decisions about their financial services sheet products. Firms will need to consider what kind of information a customer will need in order to make effective decisions and make available.
Consumer support - firms will beg to design facilities that meet the needs of their customers sans ensure products can be used as reasonably
What are the three main determinants when considering investors needs and objectives?
- Time line - the longer the investment timeline, the less need for liquidity therefore more risk can be taken
- Return required - the longer the timeline the less return required to net investment goal
- Risk tolerance - risk us related to potential return in a positive way
Other than time, return and risk, what are the four other investor needs to consider?
- Liquidity
- Tax considerations
- Regulatory requirements protection
- Religious or ethical beliefs
When budget constraints exist, what should financial planning priontise?
Clients’ objectives
What are the 5 typical objectives that clients want to invest for?
- Protection (insurance)
- Brewing
- Savings and investments - plan for schools and uni fees
- Retirement
- Estate planning - provide for or reduce inheritance tax
When we are establishing and quantifying a clients objectives, what should we think about?
How much return is needed and when?
What are hard facts?
Personal information eg. Full name, address, date of birth, residency, dependents, employment status etc.
Financial status eg. Incomes, savings, investments, pensions, liabilities, investment objectives.
What are soft facts?
Open questions → how do you feel about spread of investments? About hating on more risk? That are you wanting to achieve?
What are letters of authority?
Allows relevant third parties (e.g. An advisor) to release information to carry out due diligence
