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Personal Financial Planning > Principles and Environment > Flashcards

Principles and Environment Flashcards

1
Q

What is the Beveridge Plan 1942?

A

The state would provide some essential welfare benefits, such as, the state pension

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2
Q

What are the pay-as-you-go state benefits?

A

NI contributions (and other taxes) from employed people pay for others’ benefits

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3
Q

Are the pay-as-you-go state benefits means tested? If so, how?

A

Yes, it depends on claimant’s income/wealth and have to be ‘claimed’

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4
Q

What are some of the welfare problems post WW2 in 1940s?

A

State-run collectivist regime, provision of essential welfare benefits, pay-as-you-go state benefits

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5
Q

What are some demographic changes?

A

Life expectancy, ageing population, ‘pension time bomb’

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6
Q

What was the life expectancy of males in 1901 compared to 2011?

A

1901: 45 years compared to 2011: 79 years

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7
Q

What was the life expectancy of females in 1901 compared to 2011?

A

1901: 49 years compared to 2011: 82 years

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8
Q

What problems has arose with an ageing population?

A

There are less working and more retired

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9
Q

How many UK workers are there per pensioner?

A

3.9 (1976) down to 3.2 (2016)

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10
Q

What does a pension time bomb mean?

A

We’ll have people living longer, so we need to pay pensions for a longer time. There will be less working people to pay for the pension of the retired

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11
Q

What are some solutions for the demographic time bomb?

A

Offer less generous retirement benefits, increase retirement and pensionable age, make current generation pay more taxes, cut back on govt spending

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12
Q

Why has there been a trend towards individual responsibility?

A

Since the 1970s, driven parly by ideology (Thatcher tory govt), partly by necessity (demographic trends), continued by Blair ‘New Labour’ govt, and then the ‘Age of Austerity’

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13
Q

What must we do to have any hope of financial security in our retirement?

A

We have to start taking responsibility for our own financial welfare

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14
Q

What are the problems in making individuals responsible?

A

The lack of basic skills and mis-selling

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15
Q

What are some of the basic skills that the UK population cannot do?

A

Work out percentages and use Yellow pages

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16
Q

What are some examples of mis-selling?

A

When a product has a higher risk than clients realised, and when products are sold with reassurances or guarantees that were not met

17
Q

What can an individual look into in regards to their financial affairs?

A

Endowment mortgages, equitable life pensions, personal pensions, and PPI

18
Q

Why is there a lack of trust?

A

Various financial scandals, general ‘antagonism’ towards banks and the challenges to ethical behaviour

19
Q

What is an intermediary?

A

Anyone who mediates between client and provider of financial products

20
Q

Give examples of an intermediary.

A

Salesman (of life insurance or pension plans), financial adviser

21
Q

What is an intermediary remunerated by?

A

Commission from product provider based on value of product ‘sold’

22
Q

What are the fees from a client based on when using an intermediary?

A

Fixed amount, time spent advising client, % based on value of product bought

23
Q

What elements does a product commission typically have?

A

For a medium- to long-term investment (commission often a high proportion of first year premiums), and the level of commission usually depends on size of the investment, not the time it takes to advise

24
Q

What are the different types of financial advisers?

A

Independent Financial Adviser, Restricted Financial Adviser

25
Q

What is an Independent Financial Adviser (IFA)?

A

They offer advice on a full range of products from any provider, undertake a fair and comprehensive analysis, and are free from any influence

26
Q

What is a Restricted Financial Adviser?

A

Can only recommend certain types of products and/or products from limited number of providers

27
Q

What types of questions should you ask a potential adviser?

A

What are your fees and how will I pay? What are your qualifications? Are you Financial Conduct Authority (FCA) registered?

28
Q

Why should you ask a potential adviser what their fees are and how to pay them?

A

Because they must provide clear fee info and agree with this in advance (may be fixed, may be paid upfront, may be lump sum or instalments)

29
Q

Why should you ask a potential adviser what their qualifications are?

A

As they must have qualifications that are level 4 or above and must hold a statement of professional standing

30
Q

What is a Statement of Professional Standing?

A

It confirms suitability qualified, subscribes to a code of ethics and has maintained competence through continuing professional development

31
Q

What professional qualifications are recognised as equivalent to degree level?

A

Certified Financial Planner and Chartered Financial Planner

32
Q

How many individuals in the UK hold the Certified Financial Planner qualification?

A

About 1,000

33
Q

How many individuals in the UK hold the Chartered Financial Planner qualification?

A

About 5,500

34
Q

What does money advice services offer?

A

Free independent advice services, objectives to enhance the publics knowledge and understanding of financial affairs, and information (advice)

35
Q

What is human capital?

A

The collective skills, knowledge, or other intangible assets of individuals that can be used to create economic value for the individuals, their employers, or their community

36
Q

Give examples of external risk factors.

A

Political, social, taxation, inflation or deflation, economic forces, demographic forces, immigration, emigration, globalisation, natural evens, and luck

37
Q

Give examples of internal risk factors.

A

Health, education, income, spending and saving habits, risk tolerance, and how well we plan for the future

38
Q

When would the human capital start to decline?

A

Being off work sick, accident, getting fired, natural disaster

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