Topic 1 Financial Planning defined Flashcards
Financial Planning defined
It is a process whereby a client’s total position, both financial and non-financial, is examined and a set of actions or a plan is put in place which, once implemented, will ___________ in meeting the client’s ultimate goals and objectives
Financial Planning defined
It is a process whereby a client’s total position, both financial and non-financial, is examined and a set of actions or a plan is put in place which, once implemented, will assist in meeting the client’s ultimate goals and objectives
The benefits of seeking financial planning advice
Financial planning can help clients to:
- _______ informed decision about their money
- _______ their financial resources effectively
- _________ financial products that _______ their needs
- effectively ________ and ________ debt
- legitimately _________ tax
- __________ financial security for themselves and their dependants
The benefits of seeking financial planning advice
Financial planning can help clients to:
- make informed decision about their money
- use their financial resources effectively
- choose financial products that suit their needs
- effectively structure and manage debt
- legitimately minimise tax
- provide financial security for themselves and their dependants
The scope of financial planning advice
Financial advisers offer a large number of products and services, including:
- wealth creation
- insurance options
- Superannuation
- estate planning
- debt management
- gearing strategies
- taxation planning
- retirement planning
- social security
The scope of financial planning advice
Financial advisers offer a large number of products and services, including:
- wealth creation
- insurance options
- Superannuation
- estate planning
- debt management
- gearing strategies
- taxation planning
- retirement planning
- social security
Education
- The current level of education required of financial advisers providing financial product advice corresponds with the type of financial products they advise on.
- Financial products are divided into two categories:
- tier 1 products - _________, _________ ___________, ___________, ___________________ (SMSF), _____________, __________; and
- tier 2 products – ___________ and _________
(Regulatory Guide 146 Licensing (RG 146))
Please note: financial planners will ___________ a degree - new from ________ and existing from ______. All financial planner will be required to ____________ Continuing Professional Development (by 1 January 2019), be subject to ____________ (from 1 January 2020) and pass __________ (by 1 January 2021). Furthermore, an independent standards setting body will be established, to set the education standards and developing a comprehensive code of ethics for financial planners.
Education
- The current level of education required of financial advisers providing financial product advice corresponds with the type of financial products they advise on.
- Financial products are divided into two categories:
- tier 1 products - securities, derivatives, managed investments, superannuation, self-managed superannuation funds (SMSF), foreign exchange, margin lending facilities; and
- tier 2 products – deposit products and general insurance
(Regulatory Guide 146 Licensing (RG 146))
Please note: financial planners will require a degree - new from 2019 and existing from 2024. All financial planner will be required to undertake Continuing Professional Development (by 1 January 2019), be subject to a code of ethics (from 1 January 2020) and pass an exam (by 1 January 2021). Furthermore, an independent standards setting body will be established, to set the education standards and developing a comprehensive code of ethics for financial planners.
Financial product advice defined –
additional material
- Financial product advice is a statement of opinion, a recommendation, or a report that is intended to __________ a person in making decisions in relation to a particular financial product or class of products, or could be regarded as being intended to_______ such an influence.
- A financial product can be:
- a __________ or _________ (e.g. a share)
- an____________ in a __________ scheme
- a contract of __________ (health insurance is excluded)
- a _______________
Financial product advice defined –
additional material
- Financial product advice is a statement of opinion, a recommendation, or a report that is intended to influence a person in making decisions in relation to a particular financial product or class of products, or could be regarded as being intended to have such an influence.
- A financial product can be:
- a security or derivative (e.g. a share)
- an interest in a registered scheme
- a contract of insurance (health insurance is excluded)
- a superannuation interest
Licensing requirements – additional material
Chapter ____ of the Corporations Act 2001 ________ the licensing requirements for a provider of financial services. Such people or companies must _____ an Australian Financial Services Licence (AFSL), be a director or employee of a licence holder, or be an authorised representative acting for the holder of a licence. A person or a company _________a financial service by:
- _________ advice on financial products
- _________ in financial products (e.g. acquiring or issuing a financial product, underwriting securities)
- __________ a market in financial products
- __________ a _________ managed investment scheme
Licensing requirements – additional material
Chapter 7 of the Corporations Act 2001 sets out the licensing requirements for a provider of financial services. Such people or companies must hold an Australian Financial Services Licence (AFSL), be a director or employee of a licence holder, or be an authorised representative acting for the holder of a licence. A person or a company provides a financial service by:
- giving advice on financial products
- dealing in financial products (e.g. acquiring or issuing a financial product, underwriting securities)
- making a market in financial products
- operating a registered managed investment scheme
Future of Financial Advice (FOFA) - reasonable basis and a ‘Best Interests’ Duty obligation
- The ‘Best Interests’ Duty (BID) obligation requires advisers to ______ the client’s interest first
- At the time the advice was provided, it would be ___________ to conclude that:
- it was fit for its purpose and was likely to _______ the client’s relevant circumstances; and
- the client was likely to be in a better position if they _________ the advice.
Future of Financial Advice (FOFA) - reasonable basis and a ‘Best Interests’ Duty obligation
- The ‘Best Interests’ Duty (BID) obligation requires advisers to put the client’s interest first
- At the time the advice was provided, it would be reasonable to conclude that:
- it was fit for its purpose and was likely to satisfy the client’s relevant circumstances; and
- the client was likely to be in a better position if they followed the advice.
BID and the real life case example
Rommel Panganiban, of Bella Vista, New South Wales advised 49 clients who held life insurance via an AMP superannuation fund to cease those existing AMP insurance policies and replace them with new AMP insurance policies, rather than transferring them. The clients paid the full rate of commission for new policies to AMP Financial Planning. Mr Panganiban was paid upfront commissions.
BID and the real life case example
Rommel Panganiban, of Bella Vista, New South Wales advised 49 clients who held life insurance via an AMP superannuation fund to cease those existing AMP insurance policies and replace them with new AMP insurance policies, rather than transferring them. The clients paid the full rate of commission for new policies to AMP Financial Planning. Mr Panganiban was paid upfront commissions.
FOFA and other regulations – additional material
- Ban on conflicted remuneration - conflicted remuneration is any benefit given to an Australian Financial Services licensee (AFSL), or its representative that, due to the nature of the benefit or the circumstances in which it is given, could reasonably be expected to _________the choice of financial product that is recommended or the financial product advice given
- Fee disclosure statement (FDS) – the requirement to ________ an FDS at least once a year to all clients, including clients who joined before 1 July_______
- Opt-in renewal – financial advisers need to _______ their client’s consent at least every two years to __________ a continuing fee arrangement (applies to new clients from 1 July 2013)
- Scaled (limited) advice is advice about one area of an investor’s needs, such as ________, or about a limited range of issues
FOFA and other regulations – additional material
- Ban on conflicted remuneration - conflicted remuneration is any benefit given to an Australian Financial Services licensee (AFSL), or its representative that, due to the nature of the benefit or the circumstances in which it is given, could reasonably be expected to influence the choice of financial product that is recommended or the financial product advice given
- Fee disclosure statement (FDS) – the requirement to send an FDS at least once a year to all clients, including clients who joined before 1 July 2013
- Opt-in renewal – financial advisers need to acquire their client’s consent at least every two years to continue a continuing fee arrangement (applies to new clients from 1 July 2013)
- Scaled (limited) advice is advice about one area of an investor’s needs, such as insurance, or about a limited range of issues
