R06 :) Flashcards
Fact finding
Gaining further or missing information
Think source
Who do I need to ask to get the info, client, provider or both
If specifies source have to go down that route
Factors to consider
Issues that you know that need discussing and explaining why they are relevant
Example transfering dB to DC scheme, if low ATR and only 7 years to retirement won’t match risk profile and meet shortfall if is one
Recommend and justify
Tell client what to do and back it up with why
Don’t say could do… Tel them what to do, be brave and make recommendation
Benefits / drawbacks or advantage / disadvantages
Don’t say opposite of advantages
Short to the point
List, state, identify - all same
Just tell - no need to explain
Say any qualifying stipulations
Explain / describe / outline
All same thing - technical question with detail needed - think textbook
Calculation
Normally iht - show all steps in workings out even if don’t know
Comment on
Summarise info already have, make comments on any shortfalls in the area of focus from the question
E.g. protection - have protection in place, not enough sum assured, not long enough…
Keep high level and don’t ask any questions or make recommendations
When protection is in the read it carefully to decide what it recommendation they are looking for
If personal or family it is not mortgage related
If mortgage it is linked to lending
If death it is life assurance
If serious Illness it is crucial illness insurance
If long term illness it is income protection insurance
Relate the answer to the client
Don’t talk generic for example tax banks - apply it to Hrtp if hrtp
Tax years in exam - don’t just say this year - say this tax year
Tax relief
Don’t just say tax relief say what tax relief they would get
Eg CGT or income tax relief…
The financial planning process
Step 1 - establish and define the client and personal financial planner relationship (scope of service, qualifications, conformity to ISO22222, info about client, terms of engagement, remuneration, known conflicts interest)
Step 2 - gather client data and determination goals and expectations (cash flow, asserts/liability, insurances, contacts, statements, legal docs, needs goal timeframes, assumptions, ATR, CFL, ESG)
Step 3 - analyse and evaluate the clients financial status (use steps 1 & 2 to evaluate strengths and weaknesses Inc currently faced and in future
Step 4 - develop and present plan (use steps 1-3 present and review in line with client to see if still correct or any misinterpretation or any changes, plan should be articulated explaining why, practical recommendations)
Step 5 - implement the financial plan recommendations (based on step 4 implement plan in line with terms of engagement, documentation produced recording extend client has accepted recommendations)
Step 6 - monitor financial plan and relationship (continue to review, implement and update as needed)
The benefits of using a financial planner
Identifying problems and goals
Identifying financial strategies
Setting priorities
Researching the market for best products
Getting the planning done
Provide piece of mind
Avoiding common financial mistakes
Backed by FCA
Considers tax implications
Advice specific to you
Cash flow modelling
The investment advice process
Step 1 - establish the client goals and expectations - find out how much investment risk the client is prepared to take by ATR & CFL. Then consider risk tolerance - how much can take: degree of volatility. Then consider income, wealth, expenditure needs, investment timescales, need for liquidity, health, experience, personality
Step 2 - understand the clients status - tax position, size of portfolio, ISA, pension
Step 3 - drawing up statement of clients investment aims - a statement which the client agrees to set out. 1) purpose of investment, 2) income or growth objectives, 3) statement about risk
Step 4 - recommend appropriate asset Allocation - dependant on risk profile - 4 assets classes or more and % split
Step 5 - making fund (or stock) selection recommendations - different types of funds, in house, management service, discretionary investment manager
Step 6 - implement and monitor the plan - once accepted funds be bought, monitor, review, rebalance in line with strategy
What is capacity for loss
The customers ability to absorb falls in the value of their investments
What is attitude to risk
Risk tolerance
Amount of volatility prepared to stand
More subjective, based on experience, age, health
Life assurance
Paid on death
Single, joint life 1st or second death
Types can have
Non profit WoL
With profit WoL
Low cost WoL
Unit linked WoL
Term assurance -
Level term
Renewable
Convertible
Decreasing
Increasing
Term 100
Return of premium
Family income benefit - set term with income paid tax free
Unit linked
Types of protection
Income protection insurance - long term sickness - deferred periods 0-104 weeks, 4 occupational classes, 4 definitions of disability: own, any, suited, adl. Assessed on morbitty
Critical illness - survival period 14-30 days, provides lump sum tax free
Mortgage payment protection insurance - short term sickness, deferred periods
Accident sickness and unemployment - short term sickness cover linked to earnings deferred 30 or 60 days
Personal, accident and sickness - regular or lump sum payment, benefits fixed rather than linked to salary. Short term cover, Max 2 yes benefit
Long term care - covers chronic conditions, if individ cannot complete min number of ADL active daily living
Private medical insurance - covers short term acute conditions
Family income benefit - tax free, indexed, joint life first death - income for family in event of death
Allowances
Gifting for iht - 3,000 can roll forward unused from previous 1 year
CGT - £3000 cannot roll forward, can log losses indefinitely if registered within 4 years
PSA 1000, 500, 0
Dividend allowance 500 for all tax payers
Reviews questions think
Half past nine
Health
ATR
Legislation change
Fund performance needs reviewed
Portfolio needs rebalancing
Altered personal circumstances
State benefit rules nfs
Taxation rule cha vest
Need for capital
Income need changes
New products available
Extra money to invest - change in circumstances
Benefits of receiving financial advice
Rapport rakic
Recommendations
Analysis
Piece of mind
Protection - fca
Ongoing advice/reviews
Research
Tax planning
Risk identified
Affordability
Knowledge
Identified products/research
Cash flow modeling
Investment risk for asset classes
Tiddles icc
Taxation
Inflation
Diversity
Default
Liquidity
Event
Systemic/non systemic
Interest
Currency
Credit
Protection recommendations
Paste and twig
Product
Amount (ip)
Sum assured (cic and life assurance)
Term
Extras - trusts, waiver of premiums, indexation, guarantee premiums
