Brainscape's Knowledge GenomeTM

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


See full index

LF1 > The Customer > Flashcards

The Customer Flashcards

1
Q

What are the stages in the personal financial lifecycle (7)?

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

Who meets the financial needs of a child and what are those needs?

A

the parents

food, shelter, clothing and education, school fees (higher education costs), saving pocket money, allowance

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

What are a young single persons primary protection needs (2)?

A
  1. emergency fund
  2. protect their earnings
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is the purpose of an emergency fund?

A

provide a lump sum to meet urgent or unexpected costs (e.g. car repair or unemployment)

can also be supplemented by short-term savings

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

What are the consequences if you don’t have an emergency fund?

A

not continue contributing to long-term investment plans or protection policies

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

What is a positive of having sufficient emergency funds?

A

provide longer term investment plans - fund pensions

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

What does the term standard of living mean?

A

to describe how well a family lives in terms of having their needs and wants met

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

Which of the following needs should a family with young children tackle first:
a) building emergency fund
b) saving for a pension

A

building emergency fund

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

Do kids need to get protection for the financial consequences of their parents ill health or death when in the post-family/pre retirement phase?

A

no - if they are financially independent

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

What is inheritance tax?

A

tax payable when someone dies

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

When is inheritance tax payable?

A

at date of someone’s death, if their estate is worth more than £325,000 (£500,000 if they leave their home to their kids/gkids)

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

To maintain the same standard of living in retirement as when you worked, what is the annual retirement income you need?

A

2/3 of the final years employment income

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

What are the three retirement income categories?

A
  1. low pension, little capital
  2. relatively low pension, some capital
  3. sufficient pension income, substantial capital
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are the options available for those with low pension income and little capital?

A

seek financial assistance - state benefits and charities, help from relatives

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What are the options available for those with a relatively low pension and some capital (2)?

A

1.where a customer has capital - this can supplement relatively low income
2.risk averse customers - capital can buy a lifetime annuity (pays out secure, lowish income to customer for rest of life)

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

What are the options available for those with a sufficient pension plus substantial capital (3)?

A
  1. protect income and investment from inflation risk
  2. skilful investment
  3. comprehensive plans to minimise taxation
17
Q

What is inflation risk?

A

customers who save with banks and building societies receive interest - interest is quite low but can be at risk of inflation

inflation is the rate at which general prices are rising - as prices rise the purchasing power of money falls

18
Q

What is investment risk?

A

possibility for customer to lose some or all of money used to buy a specific investment

19
Q

How are shareholders exposed to investment risk?

A

the company runs into financial difficulty and cant pay the dividend payment to shareholders, or the company goes bust

20
Q

How are bonds exposed to investment risk?

A

if a company does not make enough money to pay its interest payments or to return the bondholders capital on maturity

21
Q

What is an asset?

A

what a person owns

22
Q

What is a liability?

A

what a person owes

23
Q

What does it mean when an asset exceeds a liability?

A

surplus capital available to invest - can be arranged to produce a better return, disposed of or help fund a pension plan which attracts tax concessions

24
Q

What is a liquid asset?

A

an asset which can be turned into cash quickly without loss

25
Q

What does it mean when liabilities exceed assets?

A

action is required to ensure the liabilities are met at their sue date or earlier than the death of the borrower
e.g. savings plan to repay

26
Q

What questions should a person ask themselves if they have an investment portfolio? (4)

A
  1. what is the purpose of the investments
  2. does this portfolio meet future financial needs
  3. are the investments performing well
  4. does risk profile of investments match risk profile of their investment objectives
27
Q

What are the limitations to the personal financial lifecycle model? (2)

A
  1. some peoples do nor fit into the lifecycle pattern - e.g. those who remain single
  2. some peoples incomes do not fit into the lifecycle pattern
28
Q

A socially responsible fund is another name for what type of investment ?

A

ethical fund

29
Q

What customer information do life and pension providers need when a customer is ready to buy a financial product? (3)

A
  1. personal details
  2. information relating to the policy
  3. customer need and objectives
30
Q

What is the name given to the document a financial adviser uses to gather customer information?

A

a fact find

31
Q

What are examples of tax? (3)

A
  1. income tax
  2. capital gains tax (CGT)
  3. inheritance tax (IHT)
32
Q

What is the purpose of tax?

A

raise money for the government - then pays for services needed by the country

33
Q

What is income tax?

A

tax deducted from salaries before they are paid out
from self-employed it is deducted from profits

34
Q

What is capital gains tax (CGT)?

A

tax payable when a profit is male on a sale of an asset

35
Q

What is a tax concession? (2)

A
  1. the return from a product will be tax free - such as interest on a cash individual savings accounts (an ISA)
  2. customer receive tax relief on the money they put into a product - pension schemes
36
Q

In order of priority, what are the hierarchy of financial needs?

A

1. emergency fund
2. protection
3. pension
4. saving and investments
5. IHT planning

**predictable future events
unpredictable future events

37
Q

At what stage of the personal financial lifecycle is preserving income and wealth likely to become a priority?

A

retirement

38
Q

What are the barriers to accurately recording customer information? (4)

A
  1. failure to listen and accurately record what customer says
  2. not clarifying precisely
  3. failure to establish early if the customer needs extra help or time to give accurate information
  4. if customer is getting impatient with process = information not disclosed

LF1 (3 decks)

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