Reviews

Question 1

Explain the Alan and Lydia the importance of reviewing their attitudes to risk on a regular basis

Answer 1

• Attitude to risk (ATR) differs for different objectives
• Changes based on investment experience / knowledge
• Changes based on personal circumstances / health
• Changes based on income / business profit
• Changes as they get older / changes over time / term of investment
• Children’s needs may change so ATR may need to be adjusted
• Fund performance / market performance / to ensure investments match ATR
• How much risk do they need to take / how much risk can they afford to take / what if target
is achieved

Question 2

State seven factors that you should consider when reviewing Alan and Lydia’s finances in relation to their new company at the next annual review (7)

Answer 2

• Company year-end / Corporation tax due
• Company profits / turnover / company debts / their remuneration
• Reviewing pension scheme / level of pension contributions / scope to start or increase
• Taken on employees / workplace pension requirements
• Reviewing any company protection benefits / Income Protection / Critical Illness / Death in
Service / Private Medical Insurance
• Future contracts / cashflow forecasts / company value
• Changes in taxation / legislation / new products

Question 3

Identify ten financial planning issues that you would discuss with Alan and Lydia at your next review meeting

Answer 3

• Ensure use of ISA allowances / CGT exemptions are maximised
• Review funding of pensions to ensure it is at the appropriate level
• Changes in tax / pensions legislation
• Any additional funds to invest
• Any changes made to their Wills
• Change in income and expenditure / increase in affordability
• Assess risk profile and capacity for loss and amend current investments if required
• Performance of investments against expectations / benchmarks set
• Review of protection needs / determine if there is a protection shortfall or excess
• Change in their health
• Change in economy
• Any new products available
• Progress of business / cashflow / property purchase

Question 4

Identify nine events, other than the annual review, that should trigger an immediate review of Alan and Lydia’s financial affairs (9)

Answer 4

• A change in their risk profile or capacity for loss
• End of tax year with ISA limits to be used or CGT exemptions to be used
• The business starts to struggle / the business is more successful than anticipated
• Change in personal circumstances / divorce / death of one of them
• They decide to change their Wills
• Unexpected windfall / inheritance is received
• Health issues / Alan or Lydia unable to work due to long term sickness
• Changes in tax / pensions legislation
• Adverse market conditions leading to a significant fall in value of their investments /
pensions

Question 5

Identify eight issues you would discuss with Alan and Lydia in respect of their wish to retire when age 60 at your next financial review meeting (8)

Answer 5

• Any change in their target retirement date
• Any change in their target retirement income
• Asset allocation / fund performance / change in investment preferences / changes in ATR or
capacity for loss
• Commencement of pension contributions by AQ Pack Ltd / on a personal basis by Alan and
Lydia
• Progress of purchase of business premises through their pensions, if applicable
• Have they switched their existing pensions to another provider / fund switches made in line
with ATR
• Any increase in expenditure / decrease in affordability / changes in income / cashflow of
business
• Economic / market conditions
• Changes in pensions / tax legislation

Question 6

Identify six key benefits Alan and Lydia will derive from having regular reviews with their financial adviser (6)

Answer 6

• The adviser can adjust the plans based on any changes in personal circumstances / a change in their objectives
• The adviser can take account of any change in their tax status / remuneration from the business / any change in value of AQ Pack Ltd
• The adviser can review the performance of their holdings against a suitable benchmark and rebalance if necessary
• The advice can be adjusted based on changes in legislation / new products becoming available
• The adviser can ensure they are on track to be able to retire at 60 whilst ensuring they have sufficient income to live on
• The adviser can review the protection in place to ensure it remains suitable for their needs