Client Advice Flashcards
What is the definition of a HNWI?
Annual income of £100,000 or more
Investable assets of £250,000
What is the definition of a certified sophisticated investor?
Assessed by a firm as being sufficiently knowledgeable to understand the risk of a particular investment
What is capital risk?
The risk that an investment may be worth less in future
What is inflation risk?
Future capital and income eroded by inflation
What is interest rate risk?
Interest rates change over time
What is shortfall risk?
Investment return falls short of the amount required for an investor to achieve their objectives
What are the main asset classes?
Cash/MMF
Fixed interest
Equities
Property
What factors should be considered when selecting a fund?
- Past performance
- Charges (one-off or ongoing)
- Financial stability of the provider
- Stability, independence, and standing of trustees, custodians, and auditors
What are the two main types of pension fund?
- Defined benefit DB
- Defined contribution DC
What is the time horizon influenced by in pension funds?
- employee retirement dates
- long-term liabilities
What is the liquidity influenced by in pension funds?
- immature fund: low
- mature fund: higher (to cover pension payments)
How does taxation work in pension funds?
Income and gains NOT taxed
What is the Pension Act 2008
All eligible worker are automatically enrolled in either their employers’ scheme or a new savings vehicle (NEST)
