The Investment Advice Process

Question 1

Explain the Investment Advice Process

Answer 1

1. Determine Client’s requirements
2. Analise Financial Position
3. Formulate a strategy to meet objectives
4. Produce recommendations and implementations
5. Revisit

Question 2

Explain Consumer Duty

Answer 2

FCA expects good outcomes in 4 areas:
1. Products and Services
2. Price and Value
3. Consumer Understanding
4. Consumer Support

From 31 July 2023 for new and existing products or services

From 31 July 2024 for closed products or service

Question 3

Explain examples where AI can help in advice process

Answer 3

1. Create Text for different groups
2. Condense reports
3. Help produce meeting minutes and summaries
4. Improved data analysis for risk management

Question 4

What are characteristics of Vulnerable Clients

Answer 4

1. Physical Disability
2. Poor Mental Health
3. Compulsive or impulsive behaviour
4. Impaired cognitive skills due to illness or ageing

Question 5

What trying to help clients identify when doing the factfind?

Answer 5

1. Investment aims
2. Level of risk they are comfortable with
3. How much they wish to invest and length of term
4. ESG considerations

Question 6

What info do you gather in a fact find

Answer 6

1. Personal info
2. needs and objectives
3. Assets and liabilities
4. income and expenditure
5. priorities
6. ATR

Question 7

What factors make up Attitude to Risk

Answer 7

1. Questionnaire
2. Previous experience
3. Capacity for loss
4. Need for risk

Question 8

What are the 3 approaches to sustainable and ESG investing

Answer 8

1. Positive Selection - assets that meet specific policy
2. Negative Exclusions - avoid sectors or behaviours
3. Responsible ownership - encouraging companies to have higher ESG standards

Question 9

What are the 4 return objectives

Answer 9

1. Capital preservation - equal or above inflation
2. Capital appreciation - above inflation
3. Current Income - provide income
4. Total Return - growth from both income and capital

Question 10

What are the main constraints impacting investments

Answer 10

1. Time horizon - shorter term - protect capital value
2. Liquidity - all should hold some cash but how much
3. Tax
4. Legal and regulatory factors
5. Unique needs and preferences

Question 11

Methods of establishing ATR

Answer 11

1. Questionnaires
2. Computer-based assessment
3. Psychometric profiling
4. Numerical Scale
5. Open Discussions
6. Graphical Representations