client objectives and advice Flashcards
sequence of financial planning process
- identify and quantify finacnial objectives
- collect data
- analyse options to meet shortcomings
- prepare report and meeting
- implement plan
- monitor and review
fact find
- basic information
- current financial situation
- current income and outgoings
- expected income and outgoings (soft fact)
investment policy statement
- risk objective
- return objective
- liquidity needed
- time horizon
- tax
- regulatory issues
- other unique circumstances
aspirations and goals
- matching client needs with solutions (soft fact)
- prioritizing the needs e.g. protecting the breadwinner, legal requirements (soft fact)
- prioritizing real future goals vs pure daydreams (soft fact)
ability and willingness to take risk
- ability
(existing wealth, time horizon and liquidity requirements, existing and future commitments, age and family circumstances) - willingness
(views, feelings and preferences, response to a questionnaire, previous investment experience) - assess overall risk tolerance
real assets
tangible
financial assets
a legal claim on future financial benefits
investments ranked according to risk-return profile
- gilts
- deposits
- investment grade bonds
- high yield bonds
- preference shares
- ordinary shares
- derivatives
ownership and tile documents
- registered securities (legal title on register)
- bearer securities (legal title determined by holder)
- nominee accounts
- joint ownership : joint tenancy (each owns 100%), tenants in common (each owns a percentage share, on death share passed)
beneficial ownership have the
right to share proceeds of sale
beneficial owners have the
power to control sale of land or buildings
discharge of contract types
- by agreement
- by performance (terms met in full)
- by frustration (external events prevent fullfilment)
- by breach
powers of attorney include (time bound)
- sign documents
- make purchases
- make disposals of property
- handle financial affairs
lasting power of attorney - Mental capacity act 2005 (replaced enduring powers of attorney in 2007)
- made when a person is in a sound mind but can become incapable
- registered with the Office of the public guardian
types of lasting power of attorney
- property and affairs : financial affairs
- personal welfare : healthcare, residence etc.
insolvency can lead to
bankruptcy
receivership (appoint receiver to take control of company’s assets and arrange distribution to creditors)
liquidation
wills
executors are granted probate (establish ownership of the estate before assets are distributed)
national intestacy rules (attempt to distribute to family members)
types of trust
- discretionary trust (discretion for trustee to distribute income to beneficiaries)
- interest in possession / life interest trust- (life tenant -income from the trust)( remainderman (reversionary interest) -received capital when life interest ends)
- bare trusts (obeys instructions of beneficiaries, trustee is a nominee only)
charitable trusts benefit from tax advantages
relief of poverty
advancement of religion
advancement of education purposes and community
trustee act 2000
-trust deed does not specify trustee’s specific investment powers
-cannot invest in occupational pension schemes, authorized unit trusts, companies or certain schemes under Charities Act 1993
trustee act 2000 allows to invest
General Investment Powers : any ordinary security (such as equities and bonds)
Specific Investment Powers : invest in freehold or leasehold land in the UK
rates for:
BoE base
mortgage rates
unsecured loans
credit cards
store cards
0.5%
2.5%-6% (additional fees)
7%-15%
15-20%
20-35%
Global investment performance standards
apply to investment management firms standardise communication method for performance for existing and potential clients
partnerships do or do not have a distinct legal entity
do not thus partners are individually liable for partnership debts
principal gives to agent
legal power to be bound by their
real property refers to
land, buildings, rights over property
=> immovable property
personal property
moveable property
trust
legal arrangement covered by trust deed
for contracts to be applicable/enforceable must involve
- consideration of both parties (gain)
- intention
- terms and conditions
- types of contract : oral / written
- capacity to contract
discharge of contract
discharge by:
- agreement
- performance
- frustration
- breach
a void and voidable contract are different
void - contract is unenforceable
voidable - one party declares it void and decides not to be bound by it
bearer instruments
gold, diamonds, money etc
registered in the name of issuer not legal owner
bearer documents
eurobond
depositary receipts
bank notes
administrators
- carry out administration when there is no will
probate
agreement from tax authorities for executors to release estate to beneficiaries
charities tax benefits:
no capital gains tax , income tax, inheritance tax or stamp duty
BUT liable to VAT on purchase
