Pt 8. The Regulatory Advice Framework - The Process of Advising Clients Flashcards
1
Q
What is status disclosure?
A
- Before fact finding with a client takes place, the adviser must provide a client with specific information about the firms and its relationship with the clients.
2
Q
In a status disclosure, what required information should the firm provide?
A
- Firm’s full name and address
- Means of communication between client and firm
- Firm’s regulatory status
- Disclose whether advice being provided is independent or restricted (if restricted the nature of restriction)
- Details of services provided
- Details of how the firm is paid
- Details of loans and ownership
- How to complain
- Coverage provided by FSCS
3
Q
When should a firm disclose fees?
A
- The clients agreement to firms fee’s must be obtained before the firm starts to act.
4
Q
What are retail client agreements?
A
- Given before conducting business, or immediately after an oral offer has been agreed, an adviser must provide a retail client with a Client Agreement
- AKA Terms of Business.
5
Q
What is a professional client agreement?
A
- Given a client agreement before conducting any business.
- If firms undertakes range of business for a professional client, it may have separate agreements for each type of business.
6
Q
What does not require a client agreement?
A
- Direct offer financial promotions
- IFA sells a self-invested personal pension scheme to a customer.
7
Q
What is KYC/fact-finding?
A
- A firm must ensure it is in possession of sufficient personal and financial information about that customer relevant to services it has agreed to provide.
- An adviser must collect relevant information in the process.
8
Q
What would relevant information include?
A
- Age, martial status, and dependants
- Income and expenditure
- Existing insurance, investments and pensions
- Needs and priorities
- Taxation situation
- Knowledge and experience of investments
- Clients attitude to risk
- Clients claims history
- Clients leisure activities
9
Q
Why are full details of income especially important?
A
- Eligibility for State benefits
- Attitude to risk
- Income tax and CGT rates
- Capacity for/ability to bear loss
- Affordability of any recommendation
10
Q
What relevant information is included for investment business?
A
- Their knowledge and experience of investments
- Their financial situation
- Their risk tolerance/attitude to risk
- Their objectives
- The purpose of any investment
- The length of time they wish to hold any investment
11
Q
In what circumstances must a suitability report be issued?
A
If firm is recommending that a client:
- Buys or sells all or part of holding in regulated collective investment scheme or trust via trust savings or wrapped in an ISA.
- Buys, sells, surrenders, converts, cancels or suspends premiums or contributions to personal or stakeholder pension contract.
- Elects make income withdrawals or uncrystallised funds pension lump-sum payment
- Purchases a ST annuity
- Enters into a pension opt-out
- Takes up life policy following personal recommendation by the firm
12
Q
What must a suitability report explain?
A
- Must explain why the transaction is suitable for the customer.
- Contains summary of main consequences and possible disadvantage.
- Additional rules apply to pensions.
13
Q
In what circumstances is a suitability report not required?
A
- Firm acting as a investment manager for a retail client making perosnal recommendations relating to regulated collective investment scheme.
- Client is habitually resident outside UK and not present in UK when consenting to proposal form to which personal recommendation relates.
- Personal recommendation is made to increase regular premium to existing product or invest additional single premiums to existing packaged product, where previous single premiums have been paid.
14
Q
What are the guidelines given when making a suitable recommendation?
A
- Give considered advice in clients best interest
- Quantify each need
- Identify the shortfall between clients need and their existing position
- Provide a list of suitable products from a range available to adviser
- Ensure client understands disadvantages and benefits of each recommended product
- Ensure client understands the practical effects of any risks involved
- If past performance is used to illustrate investment projections, it must be properly explained, and qualified as being no guarantee of future performance.
15
Q
What is a product disclosure?
A
- The regulated information given to a retail client to make them aware of all details of recommended investment.
- Each product provider must produce a KFD, KID or KIID.
