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R01 > Serving The Retail Customer > Flashcards

Serving The Retail Customer Flashcards

1
Q

7 needs in hierarchy

A
  1. Budgeting
  2. Managing debt
  3. Borrowing
  4. Protection
  5. Retirement planning
  6. Savings and investing
  7. Estate and tax planning
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2
Q

6 signs of the start of a debt problem

A
  1. Using credit for everyday bills
  2. Considering a consolation loan
  3. Only paying minimum on credit card
  4. Using credit card for cash advances
  5. Using credit card to pay mortgage
  6. Borrowing without knowing how they’ll repay
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3
Q

5 reasons to avoid debt consolidation

A
  1. High fees
  2. Longer loan period, so can end up paying more
  3. Client may take more loans and end up in worse position
  4. Higher penalties for failure to service
  5. Could lose home if secured against property
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4
Q

10 types of mortgage

A
  1. Capped 2. Cap & Collar 3. Discount
  2. Equity 5. Fixed interest 6. Flexible
  3. Green 8. Offset 9. Tracker 10. Euro
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5
Q

2 types of equity release scheme

A
  1. Lifetime mortgage

2. Home reversion plans

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6
Q

4 types of lifetime mortgage

A
  1. Roll up
  2. Fixed repayment
  3. Interest only
  4. Home income plan
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7
Q

2 options for receiving lifetime mortgage payments

A
  1. Lump sum

2. Drawdown

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8
Q

Name of plan where all or part of home is sold in return for lump sum, with client allowed to continue living under a lease

A

Home reversion plan

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9
Q

4 downsides to sale and rent back

A
  1. Usually paid less than market value
  2. Rent agreement may not renew
  3. Could be evicted, e.g. if miss rent
  4. Firm could still be repossessed if buyer gets into financial difficulty
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10
Q

3 situations where a consumer buy-to-let mortgage may be appropriate

A

“Incidental landlords”

  1. Borrowers traveling overseas
  2. Borrowers who have inherited a mortgaged property
  3. Borrowers moving elsewhere who don’t want to sell
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11
Q

5 features of a structured loan

A
  1. Fixed interest rate
  2. Fixed repayment structure
  3. Higher risk
  4. Higher cost
  5. Usually a penalty for early payment
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12
Q

5 features of unstructured loans

A
  1. Can increase repayments
  2. Capital can be reduced quicker
  3. Interest paid will also be lower
  4. Can be repaid w/o penalty
  5. Interest rate based on risk of default
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13
Q

6 factors influencing protection options

A
  1. Age
  2. Dependents
  3. Income
  4. Financial liabilities
  5. Employment status
  6. Existing cover
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14
Q

6 financial liabilities affecting level of protection required

A
  1. Mortgages
  2. Bank loans
  3. Credit cards
  4. Other loans and hire purchases
  5. Normal living expenses
  6. Taxes
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15
Q

4 ways existing protection cover may be provided:

A
  1. Existing policies
  2. Lump-sum payments from private pensions
  3. An employer
  4. The state (benefits)
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16
Q

7 stages of life cycle

A
  1. Childhood
  2. Young single
  3. Young partnered
  4. Starting a family
  5. Family with older children
  6. Post-family/pre-retirement
  7. Retirement
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17
Q

3 retirement categories

A
  1. Low pension, little capital
  2. Relatively low pension, some capital
  3. Sufficient pension income, substantial capital
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18
Q

3 main types of life assurance policy

A
  1. Term assurance
  2. Endowment policies
  3. Whole of life policies
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19
Q

6 types of term assurance

A
  1. Level term
  2. Decreasing term
  3. Family income benefit policy
  4. Increasable term
  5. Convertible term
  6. Renewable term
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20
Q

4 features of term assurance

A
  1. Life assurance only - no savings element
  2. No surrender value for early cancellation
  3. Cheapest cover
  4. Premium affected by length of policy and age of policy holder
21
Q

3 types of whole of life policy

A
  1. Non-Profit
  2. With-Profit
  3. Flexible (unit-linked)
22
Q

Characteristics of with-profit whole of life policies (5)

A
  1. Pay a guaranteed minimum level
  2. Annual bonuses can be added to guaranteed minimum
  3. Terminal bonus often paid
  4. Accumulate a surrender value - though will be low in early years
  5. Higher premiums than non-profit
23
Q

7 main types of sickness and health insurance

A
  1. Income protection
  2. Personal accident and sickness
  3. Critical illness
  4. Private medical insurance
  5. Long-term care insurance
  6. Payment protection insurance
  7. Mortgage protection insurance
24
Q

3 differences between critical illness cover and income protection

A
  1. Pays a lump sum rather than regular income
  2. Made on diagnosis of specific illness
  3. Provided by stand-alone policies, or as part of whole-life, term or endowment policies
25
Q

6 factors affecting a client’s pension needs

A
  1. Age
  2. Income
  3. Dependents
  4. Previous and current arrangements
  5. State provision
  6. Balance with other financial needs
26
Q

2 main age considerations regarding pension planning

A
  1. How old are you?

2. What age do you want to retire?

27
Q

Describe method of financial planning by assuming retirement date is tomorrow (4 steps)

A
  1. Benefits and costs expressed in today’s values
  2. Consider desired lifestyle, living costs, one-off costs, with reductions for mortgage and commuting
  3. Add in an inflation factor
  4. Consider alternative scenarios - different retirement age, lower income rises
28
Q

3 potential sources of existing pension provision

A
  1. State provision
  2. Current membership
  3. Old pension schemes
29
Q

How are Compulsory Purchase Annuities taxed differently to Purchased Life Annuities

A

CPA is taxed as earned income, while PLAs are separated into income and capital elements.

30
Q

3 types of earnings-related State pensions

A
  1. State Graduated Pension
  2. State Earnings-Related Pension
  3. State Second Pension
31
Q

2 main types are of private pension

A
  1. Occupational

2. Personal

32
Q

2 types of funded pension scheme

A
  1. Self-administered

2. Insured

33
Q

What are first three main priorities when getting to grips with money?

A
  1. Pay off any expensive debts
  2. Protect the family
  3. Have an emergency fund
34
Q

8 potential features that distinguish savings accounts

A
  1. Interest rates
  2. Notice periods
  3. Minimum deposits
  4. Additional bonuses
  5. Restricted access
  6. Frequency of interest payments
  7. How account is accessed
  8. Tax-free savings
35
Q

6 NS&I product types

A
  1. Tax-free investments
  2. Guaranteed returns
  3. Income products
  4. Simple savings accounts
  5. Investments for children
  6. Sustainable investing
36
Q

4 uses of deposit-based savings

A
  1. Emergency fund
  2. Liquidity (preservation of capital and protect medium term investments)
  3. Provide opportunity for new opportunities
  4. Balancing asset classes
37
Q

5 main asset classes

A
  1. Shares or equities
  2. Bonds
  3. Property
  4. Cash
  5. Alternatives
38
Q

3 layers of investments

A
  1. Assets
  2. Pooled investments
  3. Tax wrappers
39
Q

8 types of sustainable and ESG investments

A
  1. Positive screening
  2. Negative screening
  3. Norms-based screening
  4. Best in class
  5. Shades of green
  6. ESG integration
  7. Impact investing
  8. Thematic investing
40
Q

6 considerations when constructing a sustainable portfolio

A
  1. Strength of client’s beliefs
  2. Incorporate values and views into process
  3. Recommend appropriate products
  4. Whether views restrict choice or potential for diversification
  5. Whether there are additional charges
  6. Volatility and performance differences
41
Q

What are the short-term, medium-term, long-term uses of equities.

A

Short: pure speculation
Medium: dividend income, real growth, capital preservation, asset allocation (balance)
Long-term: same as medium, but with greater capacity for capital preservation as fluctuations iron out

42
Q

5 other names for bonds

A
  1. Loan stock
  2. Fixed interest
  3. Debt securities
  4. Gilts
  5. Corporate bonds
43
Q

5 benefits of pooled investments

A
  1. Professional expertise
  2. Spreading risk
  3. Reduced dealing costs
  4. Less administration
  5. Choice
44
Q

4 main pooled investments

A
  1. Open-ended investment funds
  2. Life and pension funds
  3. Endowments
  4. Investment trusts
45
Q

2 management types of pooled investments

A

Active and passive

46
Q

5 features of endowments

A
  1. Have a fixed term
  2. Usually a fixed, regular premium
  3. Part of premium to buy life cover
  4. Rest is invested
  5. Amount of life cover dependent on age, premium, and length of policy
47
Q

4 types of endowment

A
  1. Mortgage endowment
  2. Savings endowment
  3. Friendly society savings plan
  4. Friendly society children’s savings plan
48
Q

2 basic uses of life policies in IHT planning

A
  1. Take value out of estate without giving immediate benefit to beneficiaries
  2. Provide a tax free lump sum on death to pay IHT liability
49
Q

4 main approaches to tax planning

A
  1. Make the maximum use of tax allowances
  2. Choose the most suitable investments according to the investor’s tax position
  3. Choose investments with tax-free returns
  4. Choose investments which qualify for tax relief on initial amount invested

R01 (5 decks)

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