Generic Questions Flashcards
List the advantages of receiving advice from an IFA (8)
(1) Your objectives and priorities are identified
(2) You benefit from adviser research
(3) You receive help with budgeting
(4) Your existing arrangements are assessed
(5) You receive help with tax planning
(6) Your ATR is assessed
(7) You receive regular reviews
(8) You benefit from consumer protection/regulation
What are the advantages of paying IFA fees by the hour? (4)
(1) It is familiar and similar to other professionals
(2) It is easily understood and compared
(3) It is based on the work actually undertaken
(4) A fee cap may apply
What are the disadvantages of paying IFA fees by the hour? (4)
(1) The adviser may run up clock
(2) It deters contact
(3) It is paid from personal funds
(4) It is an unknown cost
What are the advantages of paying IFA fees through your investments? (4)
(1) A volume discount may apply for large funds
(2) It is not paid from personal funds
(3) The adviser is incentivised to grow the fund
(4) It is attractive for small funds
What are the disadvantages of paying IFA fees through your investments? (4)
(1) It is an unknown cost
(2) It is not based on the work actually undertaken
(3) There may be additional charges for extra services
(4) It reduces growth
What are the advantages of paying fixed IFA fees? (4)
(1) It is familiar and similar to other professionals
(2) It is easily understood and compared
(3) It is a known cost
(4) It is attractive for large funds
What are the disadvantages of paying fixed IFA fees? (4)
(1) It is not based on the work actually undertaken
(2) It is paid from personal funds
(3) It deters contact
(4) There may be additional charges for extra services
Describe the process an IFA should follow when providing advice (8)
(1) Establish the relationship and confirm the scope of service
(2) Determine their objectives, priorities and ATR
(3) Assess their existing arrangements
(4) Research your recommendations
(5) Present your recommendations
(6) Provide a report and the regulatory documents
(7) Implement your recommendations
(8) Review the financial plan regularly
Identify the factors that typically influence a client’s ATR as they approach retirement (9)
(1) Age and timescale
(2) Health and longevity
(3) Income and expenditure
(4) Assets and liabilities
(5) Income and capital required in retirement
(6) State pension and benefit entitlement
(7) Investment experience
(8) Objectives and priorities
(9) Economic climate and market conditions
Explain the importance of reviewing a client’s ATR regularly (6)
(1) It changes with their objectives
(2) It changes with their investment experience
(3) It changes with their health and circumstances
(4) It changes with their income and expenditure
(5) It changes with their age
(6) It changes with the economic climate and market conditions
What are the three aspects of ATR? (3)
(1) Risk tolerance
(2) Investment knowledge
(3) Capacity for loss
List the features of active fund management (4)
(1) Performance relies on the manager’s skills
(2) The manager can avoid certain sectors and regions
(3) The manager can invest more freely than in passive funds
(4) There are higher fees than in passive funds
List the features of passive fund management (4)
(1) A computer replicates an index without outperforming it
(2) The fund will underperform the market due to charges
(3) There are lower fees than in active funds
(4) There is no scope for human error
List the features of an advisory fund service (5)
(1) The manager ascertains the client’s ATR and a suitable AA
(2) The manager makes recommendations
(3) The client decides whether to proceed
(4) The manager charges based on the recommendation
(5) The manager provides an end-of-year statement
List the features of a discretionary fund service (7)
(1) The manager ascertains the client’s ATR and a suitable AA
(2) The manager buys and sells on the client’s behalf
(3) The client specifies whether they wish to avoid sectors
(4) A trading limit may apply
(5) The manager charges based on the overall portfolio’s value
(6) There are higher fees than in an advisory service
(7) The manager provides an end-of-year statement
List the advantages of using a DFM (5)
(1) They may outperform the market
(2) The approach is bespoke to you
(3) There is no ongoing administration
(4) They use a wide range of assets and funds
(5) They provide a consolidated tax statement
List the disadvantages of using a DFM (5)
(1) There are large fees
(2) They may not outperform the market
(3) You lack control
(4) They may invest in undesirable funds
(5) They may not consider your broader financial planning
List the benefits of holding investments on a platform (12)
(1) Transfers and switches are quick and easy
(2) You have online access at all times
(3) You receive consolidated valuations
(4) You can access a wide range of funds
(5) Performance is easy to track
(6) You receive consolidated tax statements
(7) It promotes a good relationship with your adviser
(8) There is a simple charging structure
(9) There are no initial charges
(10) You may receive a volume discount for large funds
(11) Administration is reduced
(12) You benefit from automatic rebalancing
List the main benefits of diversifying a portfolio (4)
(1) It reduces volatility
(2) It increases capital growth potential
(3) It can be easily rebalanced
(4) It can match your ATR
List the limitations of using an AA model (4)
(1) It does not consider tax wrappers
(2) It does not consider charges
(3) Its underlying assumptions may be incorrect
(4) It must be rebalanced regularly
What must an investment policy statement state? (5)
(1) The investment’s purpose
(2) The investment’s income and growth objectives
(3) The investment’s timescale
(4) The investment’s AA
(5) The client’s ATR
Explain how income protection works (8)
(1) You receive a tax-free income if you are unable to work
(2) A deferral period will apply
(3) Rehabilitation benefit may apply
(4) Proportionate benefit may apply
(5) There are no limit on claims
(6) The income is limited to 50-65% of your employment income
(7) It can cover your own occupation or any occupation
(8) Premiums can be guaranteed or reviewable
Explain how PMI works (9)
(1) It covers the cost of private treatment
(2) It includes home nursing and a private ambulance
(3) It may include alternative medicine and dental care
(4) It covers acute conditions only
(5) You may need to pay an excess or co-payment
(6) An indemnity policy may apply
(7) Basic, standard and comprehensive packages are available
(8) It counts as a benefit-in-kind if it is covered by an employer
(9) A statement of best practice applies to sales
Explain how salary sacrifice works (7)
(1) A written agreement is signed with your employer
(2) The employer reduces your gross salary by an agreed amount
(3) Your net salary is often unchanged
(4) The reduction is treated as an employer contribution
(5) It reduces your income tax liability
(6) It reduces employer and employee NICs
(7) There is no additional administration for the employee
