The regulatory advice framework

Question 1

what information is contained in a Key information/investor document?

Answer 1

the main features of any financial products they are considering

Question 2

what information is contained in a product key facts illustration?

Answer 2

Information specific to their circumstances, quote, investment and typical scenarios in relation to returns or proceeds

Question 3

What information is contained in the KID/KIID as required by the FCA?

Answer 3

nature of investment
aims
risk factors
terms of investment
cancellation/withdrawal rights
compensation arrangements
complaints 
information required by the Solvency directive

Question 4

What type of information is also required by the solvency directive in a KID/KIID?

Answer 4

name and address of insurer
solvency and financial conditions
definition of each benefit/option
term
means of termination
means of payment
distribution of bonuses
indication of surrender values and whether premiums are guaranteed
Premiums
unit linking details
Law applicable

Question 5

What are the key components of a pure protection policies?

Answer 5

they are long term
benefits payable on death or incapacity
contract has no surrender value or it does not exceed a single premium
no conversion or extension options

Question 6

What does a life office carying out a with profits business need to have?

Answer 6

A PPFM document (principles and practices of financial management) setting out how they manage their business

Question 7

What are the two key elements of ‘informed choice’ guidance that can be given to a customer?

Answer 7

Provider guidance - product information supplied directly to the customer from a provider
Generic Guidance - general information on a type of product that as not specific to a provider

Question 8

What are the three bodies under MAPS (money and pension service, designed to help customer understand pensions?

Answer 8

Pension wise
The Money advice service
Pensions advisory service

Question 9

Who is pension wise available to and what is the service offered?

Answer 9

phone service to the over 50’s, with defined contribution schemes in place, to help decide
What they can do with their pension pot
The different type of pensions and how they work
What is or isnt tax free

Question 10

What are the aims of the MAS (money advice service) and how can you access it?

Answer 10

To enhance understanding and knowledge of their finances

Available online or via a consumer help line

Question 11

Whats is the purpose of the TPAS (the pensions advisory service)

Answer 11

Deliver information and guidance on all pension matters across the board

Question 12

What are the six elements of fair treatment of customers?

Answer 12

1. confident consumers are dealing with firms where fair treatment is central to corporate culture
2. Products and services are designed to meet the needs of consumers
3. Provided with clear information and are kept up to date during and after the sales process
4. Advice received takes account of personal circumstances
5. Products are as they are led to expect and of an acceptable standard
6. No unreasonable post sale barriers to change products, switch or submit a claim

Question 13

What are the requirements/considerations to meet the ‘independance’ requirement by set by the FCA?

Answer 13

Some FCA mandated products might be excluded (such as unregulated collective investments)
Certain multi manager investment fund recommendations might be inadequate
Firms using product panels, must allow for off-panel recommendations
Using a single platform may be insufficient
model portfolios must still cater for clients individual circumstances
Firms do not need to offer pension transfers or long term care insurnace
discretionary investment services will not usually be included

Question 14

what should a single tied adviser do if they do not have a suitable product within their providers product range?

Answer 14

They should inform the client they have nothing suitable

Question 15

What stakeholder products are included in the basic advice rules?

Answer 15

Short term deposit based stakeholder products
medium term collective or life stakeholder products
long term stakeholder pension schemes

Question 16

What is the difference between a real time and non- real time financial promotion?

Answer 16

A real time would be during the course of a personal visit/telephone call or other interactive dialogue
A non-real time cover all others such as strategic adverts

Question 17

How long should a non real time financial promotion be kept for;
pension transfers?
General MiFID promotions (not life or pension)?

Answer 17

pension transfers - indefinitely

MiFID promotions - 5 years

Question 18

What is the criteria for a real time promotion to a client?

Answer 18

fair, clear and not misleading
the purpose is clear at the start and the person identifies themselves and the firm
Check the recipient wishes to proceed if not previously agreed and stop if necessary
Gives a contact point
Does not may contact at unsocial hour or by an unlisted number without permission

Question 19

Under what circumstances could a customer receive a cold call?

Answer 19

only if the customer has an established relationship with the firm
the promotionrelates to a generally marketable packaged product which is not highly volatile

Question 20

When must a suitability report be issued?

Answer 20

Buys, sells all or part of a holding of a collective investment scheme, trust via a trust savings scheme or wrapped ISA
Buys, sells, surrenders, converts, cancels or suspends a personal or stakeholder pension
makes withdrawals or an uncrystalised funds pension lump sum payment
purchase of short term annuities
takes up a life policy following a recommendation

Question 21

It what timescale must a suitability report be provided?

Answer 21

Life policy - before the contract is concluded
pensions - no later than the fourteenth day after conclusion
Any other case - asap

Question 22

What are the guidelines in making a suitable recommendation?

Answer 22

Give considered advice, conscientiously, in clients best interest
each need quantified and shortfalls between existing cover indentified
for each need, provide a list of suitable products
Compare the products available and by the process of elimination, ID the most suitable
Ensure the client understands the disadvantages as well as the benefits and any risks
Ensure it is clear past performance is not a guarantee of future

Question 23

If a client disagrees with your recommendation and instructs you to take a diferent course of action you consider to be unsuitable, can you proceed.

Answer 23

Yes, you can but with caution. You are able to decline the transaction if you believe it is significantly disadvantageous to your client

Question 24

Why would financial advisers be exempt from MiFD11 (market in Financial Instruments Directive)

Answer 24

if they do not hold client assets or money
if they do no do business outside the UK

(article 3 firms)

Question 25

What areas for retail investment firms changed as a result of MiFID?

Answer 25

Disclosure of costs and charges relating to recommendations
Product Governance
Describing Advice services
Structured deposits
Suitability
Recording conversations
Inducements

Question 26

Whats is the aim of IDD (insurance distribution directive?

Answer 26

To enhance consumer protection when buying insurance (including life, general, insurance based investments.
Support competition
Product oversight
governance
abd enhanced conduct rules for IBIP's

Question 27

What are the three categorisations for investment business clients?

Answer 27

Retail Client
Professional Client
Eligible Counterparty

Question 28

What needs to be considered by firms to maintain Fiduciary relationships?

Answer 28

Fairness to clients
Relationships with Product Providers
Conflicts of interest and material interest
Exclusion fo liability
Clear, fair and not misleading information
Firms holding themselves out as independant
Inducements and commissions
Charging customers for handling complaints

Question 29

What needs to be included within Status disclosure?

Answer 29

Firms regulatory status (auth and reg by FCA)
Firms advice status (tied etc)
Services provided
how the firm is paid
details of loans or ownership
how to complain
Coverage of the FSCS

Question 30

When does disclosure information not need to be given?

Answer 30

where the information has already been given
where the initial contact is by telephone (must be given later and confirmed in writing)
For execution only in non-packaged life products

Question 31

What elements must a firm provide to a client in terms of renumeration of employees when arranging a retail investment product?

Answer 31

Attach a proper value on any benefits or services as well as any cash
including - cars, loans, pensions and support services that could not be provided for an IFA

Question 32

when must a client agreement be provided?

Answer 32

before conducting any business

immediately after if the business was concluded using distance communication

Question 33

When would a firm question a clients request for execution only?

Answer 33

If it concerned a complex financial instrument

Question 34

What do firms need to ensure for an insistent client?

Answer 34

Provide advice that is suitable to the individual client
Clearly explain the risks of the alternative course of action
be clear that the clients actions are against the firms advice

Question 35

What is the difference between execution only and best execution?

Answer 35

execution only - customer receives no advice

best execution - a firm takes all reasonable steps to obtain the best result for the client

Question 36

What are the four categories of introducer organisations and why it is important firms have proper agreements in place?

Answer 36

1. Authorised by the FCA
2. Regulated by a DPB
3. Exempt firms
4. Not FCA authorised

To ensure all regulatory aspects are clear and all are aware of thier responsibilities

Question 37

What type of investments have a 30 day cancellation period?

Answer 37

Life policy (including pension annuity, pension policy within a wrapper)
Personal or stakeholder pension
Pension transfer
Variations of existing personal or stakeholder pensions, by electing to take income withdrawals

Question 38

What type of products sold would mean the client is automatically considered as vulnerable?

what could an adviser do if they are in any doubt the client does not fully understand the product?

Answer 38

Equity release products

Involve a family member or power of attorney

Question 39

What is the FCA definition of a vunerable customer?

Answer 39

Someone, who due to thier personal circumstances, is suseptible to detriment, particularly when a firm is not acting with the appropriate levels of care

Question 40

How often should a client receive a financial review according to the regulations?

Answer 40

under MiFID if offering periodic assessment, then annually, otherwise there are no specific rules