Servicing -investments

Question 1

Savings

Answer 1

Regular - out at side into regular lump dumps. These can be used for houses and cars

For Houses there can be multiple forms.

Lump sum - come about firm money that has been accumulated over time inheriserer or arisen as a result of a windfall the phrase lump
Sum investment is used. They may want to provide real growth above the rates of inflation. An alternative would be to convert it at some time in the future into a regular income for retirement or other reason

Question 2

Investment

Answer 2

Long term - I’d .1.5 years plus’s and the longer the term of the savings the more important it is to maintain and build the value.

Medium - this covers 5-.1.5 year periods and there will be some
Overlap with short term investment such as where a saving for a child or a cruise.

Short - immediate this to have a pot. Credit cards are good at having access to instant access cash. Can include holidays deposits and requirements for 5 years.

Prorities - paying expensive debts, emergency money and protection. This should be up two half of annual
Expenditure or 10% investment

Question 3

Savings account

Answer 3

• minimum deposits
• notice periods
• additional bonuses
• restricted access
• how the account is accessed
• the way interest added
• help to but ended in 2019
• £5,000.00 savings rate band after then it’s all taxes based on income - £500 higher rate allowance of saving Normal rate allowance is £1,000.00 none for additional.

Savings certificate is free

Question 4

Deposit based savings

Answer 4

Used for short medium and long

• emergency - have a specific role in planning to ensure that there is always morgue available.

-Short-term - deposits are the only ones that maintain a rate
- inflation erode investment returns in the longer term but over the the short term the main

Question 5

Equity investments

Answer 5

There are for types of investments
-cash
- bonds
- property
- shares

Investors use it in the short term for speculation they use a high risk one and smit should only be traded by experienced investors

They use it in the medium term in order to get increases dividends this is not likely though so shouldn’t be used primarily. They should always be using other forms for the main goal

• asset allocation - sharing the asset allocation with cash/ bonds increases the diversity and lowers the risk.
• real growth - investing in companies that sell goods and services mean that as inflation goes up so should their price and the companies profits. This helps with the day to day cost of living.

Equities outperform deposits and fixes interest as they help with the ups and downs of the market over a long period so they can be used for people at the start of savings for a pension.

Question 6

Securities and corporate bond

Answer 6

• they are used to keep pace if inflation
• the bonds are Blaine at a nominal value form corporation or the government and then traded on the bond market.
• there is a risk that the company consonant could collapse if it’s a corporate one.
• the gilts tend not be as risky as the UK is thought to be able to pay the money back.
• index linked fixed interest is when interest and coastal it linked to the RPI. Most corporate bonds are not like this and the government ones link it to RPI. These index linked bonds offer the solution of inflation as investors can be sure that they will keep up with inflation
• there will be a balance of the value between a stock paying a percentage over inflation at say 2% with inflation at 2.5% and a normal foxed interest stock paying 5% so they are not always the best. Could get a savings from a bank with 5.5%
• UK inflation is changing from RPI to CPI meaning that it will offer lower rates.

Question 7

Use of fixed interest investments

Answer 7

• they are considered low risk

Usually clients use them in an Leif or into trust rather than individually as they still need to take care
Strategic bond funds are popular which is where the IM decided kn the proportions of the above assets which essentially enables the bond to fund to Asia or to changing market and economic conditions.

• some are junk bonds where they are high return and high risk.

1 they can be used short term directly or as part of a pooled investment

They can be mediums and used in their own right and are usually as part of a strategy

Long term fixed interest investments are used in a number of bigger length strategy in a number of longer term investments

Question 8

Property investments

Answer 8

• provide income
• stable
• can be hard to sell in letting
• prices can go up and down
• they are illiquid
• direct is quicker

Question 9

Derivatives

Answer 9

• assets
• unlikely to be invested in directly but part of the pooled asset veichle
• a right or an obligation to but or sell another type of asset such as a share fixed interest investment or a commodity - a specific price to someone else at a specific future date.
• the specific orice may turn out to be higher or lower than the market price at that date
• futures and options are one

Question 10

Contracts for difference

Answer 10

• CFDs are contracts staging eBay one fo the two parties will pay the other the difference between the current value of an asset and its value at a later date.
• if the difference is listjove then you make a profit but if negative rhan you could loose your money and have to pay the other party value.
• CFD - spread bet
• structured products are usually only able to be bought and sold at a limited time. After then they are tied up for 1 - 10 years. Some offer full partial or no protection.

Question 11

ISAs

Answer 11

• £20,0000 a year
• can have different ones
• can have more than one with different providers.
• can put them in a LISA / innovative finance ISA but LISA have to be 39 and below.
• minimum in age for stocks and shares is 18

Innovative ISA is a peer to peer lending platform revive their interest tax free

Question 12

Open ended

Answer 12

• increase the number of shares
• they are pooled
• inevsters hope value will go up and may get a dividend
• life offices run open ended life funds that are linked to their investment bond products

Question 13

Pooled investments

Answer 13

• expertise
  Spreading risk
• reduced costs
  -choose
• administration

They can be open ended investment trusts endowments pensions

Passive - uses tracker funds such as the dow jones they may choose to but the quiivalent amount of shares

Question 14

Investment trusts

Answer 14

• these are closed ended the number stays. Unlike unit tusts and OEIC
• when demand is high the value is said to not be a dicoisnt but a premium

Question 15

CTFs

Answer 15

Investors could start a savings or investment account for their child using the governments scheme and money. They get an initial investment

• cash stocks and shares and stakeholder:
• stake holders risk has been changed now
• new stopped in 2011

Question 16

Tax planning

Answer 16

• put the maximum in pensions
• tax concessions are available in ISAS income protection moregatage protection qualifying life polcicies sickeness redundancy and long term care
• tax mitigation is legal veichle

Question 17

Inheritance

Answer 17

• nil rate band
• apuses pass on the allowance
• £175000 for a child
  This essentially brings it up to 1 million as spouses have theirs.
• nil rate can be passed on
• residence nil rate can also be used when people have not used it was introduced on 2017 to allow the inheritance of the band.
• residence band was created in 2015 for the first time for children by the government.

TRUSTs - can put assets in trust to get them out an estate.

Question 18

Life policies

Answer 18

• written into trust.
• used to pay inherent tax at 40%
• tax free
• reduces the value of the estate
• can pay to benfiricaries within the trust
• helps to have a whole of life policy increasing cover amount to protect the values.
• remember the trustee can be tbe donor to make sure that the mo eu is used as they want it.
• pensions are paid to beneficiaries.
• the trustees can choose what the settlor would want