Investment Advice Process Flashcards
The investment advice process can be broken down to include 9 points:
- Establishing and defining the relationship between the client and the adviser
- Gethering client data and determining goals, expectations and any ethical issues
- Analysng and evaluating the client’s financial status.
- Creating a risk profile in agreement with the client.
- Formulating the investment strategy for asset allocation.
- Selecting inestments, funds and products.
- Selecting a choice of wrappers for tax efficiency.
- Presenting and implementing recommendations.
- Monitoring the portfolio and, when appropriate, rebalancing the portfolio and switching out of underperforming investments.
Client categorisation rules - a firm is required to categorise its clients if it is carrying on designated investment business.
COBS defines a client as someone to whom a firm intends to provide, provides or has provided a service in the course of carrying out a regulated activity.
A client may be categorised as :
- Retail client
- Professional client
- Eligible counterparty
Per se professional clients are often ones that are automatically treated as professional clients and are generally:
- another authorised firm
- ‘large undertakings’ that meet certain size criteria for the size of their balance sheet, turnover or own funds
- national or regional governments, public bodies managing public debt, banks and supranational institutions
- institutional investors
Elective professional clients are those who have chosen to ‘opt up’ to be treated as a professional client.
Firms are required to provide clients with appropriate information in a durable medium or on the website that can be understood by the client:
- the firm and its services;
- the investments and investment strategies it proposes to use, including guidance and warnings of the risks associated with them;
- the execution venues it will use; and
- costs and associated charges