Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Financial services, regulation and ethics: RO1 > RO1: Chapter 2 > Flashcards

RO1: Chapter 2 Flashcards

1
Q

What are the three main categories for expenditure?

A
  • Essential spending (house, insurance, bills etc)
  • Everyday spending (food, travel, cleaning etc)
  • Occasional or non-essential spending (Clothing, entertainment, holidays etc)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are the two main pieces of information you need to determine a clients budget for spending on financial services?

A

Income and Expenditure

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is Debt Consolidation?

A

This is where somebody sets up a new loan to repay a existing loan (often with lower interest rates and lower monthly payments)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Why should care be taken when taking out a consolidating loan secured on a family home?

A

Could potentially come into more debt and lose the property.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is Life cover?

A

Protection product which covers loved ones in event of death,

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is income protection?

A

Protection product which covers income in the event of the individual being unable to work and gain income through sickness.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is critical illness cover?

A

Protection product to cover individual with serious illness.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

At what age is the greatest need for protection products?

A

Mid 20’s to early 40’s (In need of protections for children/family, mortgages, death/illness, redundancy etc)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Why must existing cover be taken into account in assessing protection needs?

A

As you could be provided with more cover than you require (double up on products).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are Mortgages used for?

A

A Mortgage is used to provide security in exchange for a loan on a residential property.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are the two main ways a Mortgage can be repaid?

A
  • Capital and interest repayments

- Interest-only

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is a interest-only mortgage?

A

This is where only the interest is paid and the outstanding amount of the money remains the same which is paid at the end of the term in a lump-sum.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is a capital and interest repayment mortgage?

A

Monthly repayments which include an amount to cover contributions towards the repayment and a amount to cover interest.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are the two main types of loan?

A
  • Structured loan = This loan has a fixed interest rate and fixed repayment structure.
  • Unstructured loan = You can increase the loan repayments to reduce the amount outstanding and therefore the interest is reduced.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is a equity release product?

A

This is where a client can release money tied up in their home. They have no fixed term and allow the client to stay in there home for as long as they need.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What are two main equity release products?

A
  • Lifetime mortgage

- Home reversion plan

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is a no negative equity guarantee?

A

The guarantee promises that the client and their beneficiaries will never have to pay back more than the value of their home (even if the debt is larger than the value of the home).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is a home reversion plan?

A

The client can sell all or part of their home in exchange for a cash lump sum, regular income or both. The home or part of which is sold is then owned by the home reversion provider but the client is allowed to carry on living there under lease or until they die.

19
Q

What is a sale and rent back agreement?

A

This is where a company may offer to help a client with financial difficulties by buying their home and then renting it back to them for a fixed period of time. (Also known as flash sales as the home can be bought quickly)

20
Q

What is Term assurance?

A

Term assurance is a protection product with no investment element, the client decides on the term of the policy and and pays a regular premium until the end of the policy or until they die. A sum assured will be paid by the life office if the client passes away before the end of the policy however if they survive past the term no further premiums are paid and policy expires.

21
Q

What is level term assurance?

A

This a protection product which offers a level sum assured in return for a level premium paid throughout the term.

22
Q

What is decreasing term assurance?

A

This a protection product designed to meet the needs of clients with a decreasing liability on death, such as loans which are still gradually being repaid.

23
Q

What is increasable term assurance?

A

This is a protection product which allows for the sum assured to be increased regularly over the term of the policy (without evidence that the life assured is still in good health). Life office will charge higher premiums which increase as the sum assured increases.

24
Q

What is convertible term assurance?

A

This is a protection product which allows the policyholder to change the term of the policy to an endowment or a WOL with the same sum assured before the end of the term.

25
Q

What is renewable term assurance?

A

This is a protection product which allows the policyholder to extend the coverage of the term for a set period of time without having to re-qualify for new coverage.

26
Q

What are Endowment policies used for?

A

Endowments are used for savings and combine life cover with investment.

27
Q

What are the three main types of Whole of Life products?

A
  • Non-profits
  • With-profit
  • Flexible
28
Q

What does with-profit mean on a WOL policy?

A

This guarantees to pay a minimum level amount of life cover on the death of the life assured and this amount increases annually by the addition of annual bonuses (which are not always guaranteed)

29
Q

What does Non-profit mean on a WOL policy?

A

guarantees to pay a fixed amount of life cover on the death of the life assured

30
Q

What does Flexible mean on a WOL policy?

A

policyholder chooses between minimum and maximum life cover and the cover selected can be changed.

31
Q

What affect does having previously contracted out have on the new state pension?

A

A deduction will be made from the individuals state pension for any time spent contracted out.

32
Q

What other methods can be used for retirement instead of having a pension in place?

A
  • ISA (Tax-free making it attractive to withdraw money without tax for retirement)
  • Purchased Life Annuity
  • Buy-to-let property (Taking a income from your property monthly from tenants)
  • Selling a business
33
Q

What must you do to qualify for the new state pension?

A

You must have paid your national insurance contributions for at least 35 years and not have been contracted out at any point.

34
Q

What are the two main pension schemes?

A
  • Occupational

- Private/Personal

35
Q

What are the four main asset classes?

A

Shares, Bonds, Property and Cash

36
Q

What is diversification?

A

This is where you spread the risk over a range of investments, in other words ‘not putting your eggs all in one basket’

37
Q

What is Capital Growth?

A

Capital growth is where your original investment grows in value.

38
Q

What is the difference between active and passive management?

A
  • Active management = Money manager tracks performance and will research the market to make buy/sells to make a return for the investor.
  • Passive management = Track the market and aim to replicate the index to match performance.
39
Q

What is a Derivative?

A

Contract between two or more parties whose value is agreed upon an underlying financial asset (type of asset class).

40
Q

What does UK domicile mean?

A

If the UK is a clients permanent home.

41
Q

What is the current Nil Rate Band?

A

£325,000.00

42
Q

What is the current Residence Nil Rate Band? (Where a parent leaves residence to a direct descendent)

A

£175,000.00

43
Q

What is the current Inheritance Tax? (IHT)

A

40%

44
Q

Name a way to reduce the impact of IHT?

A
  • Write a Will

- WOL policy with last survivor basis.

Financial services, regulation and ethics: RO1 (11 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions