TOPIC 14 - Understanding and satisfying customer needs

Question 1

Short-term accessible savings accounts are the most likely choice for which of the following?

a) Established families.

b) Young, employed adults.

c) Retired people.

d) Mature households.

Answer 1

b) Young, employed adults.

Question 2

For which product must a firm keep records of the advice given indefinitely?

a) Personal pensions.

b) Life policies.

c) Investments.

d) Pension opt-outs.

Answer 2

d) Pension opt-outs.

Question 3

When advising a self-employed customer, it is important to establish their:

a) regular overtime.

b) commission earnings.

c) basic salary.

d) net profits.

Question 4

Which of the following best describes a customer’s capacity for loss?

a) How well they could cope financially with investment losses.

b) Their feelings about taking investment risks.

c) How much they have in emergency funds.

d) How they would cope with unemployment.

Answer 4

a) How well they could cope financially with investment losses.

Question 5

It is important to ensure that the customer agrees with the adviser’s assessment of their priorities.

a) True
b) False

Answer 5

b) False

Deciding a plan of action and agreeing its priority order is the customer’s decision, assisted by input from the adviser.

Question 6

There is a well‑established pattern to the way in which most savers and investors build up and hold their assets. Which of the following is usually the last part of that pattern?

a) Short-notice deposits.

b) Current account.

c) Fixed-term bonds.

d) Equity-based products.

Answer 6

d) Equity-based products.

Question 7

Which of the following is least likely to cause a firm to treat a customer as ‘vulnerable’?

a) Health.

b) Bereavement.

c) Disability.

d) Marital status.

Answer 7

d) Marital status.

Question 8

The FCA prescribes the format of the factfind and the information required.

a) True
b) False

Answer 8

b) False

Question 9

What should an adviser treat as the first priority when addressing a customer’s financial situation?

a) Tax efficiency of their savings and investments.

b) Financial protection for dependants in the event of their death.

c) Providing an income for them in retirement.

d) Build up investments to increase their value.

Answer 9

b) Financial protection for dependants in the event of their death.

Question 10

Which of the following is not a soft fact?

a) The customer’s thoughts on their current arrangements.

b) The customer’s objectives.

c) Potential changes in the customer’s circumstances.

d) The customer’s current employment and salary.

Answer 10

d) The customer’s current employment and salary.

Question 11

Which of the following would usually be a priority need for a client taking out their first mortgage?
a) An emergency fund.
b) Income protection.
c) Medium term investments.
d) Pension planning

Answer 11

b) Income protection.

Question 12

Why is it important to establish a client’s place of birth as part of the factfind?

Answer 12

For domicile purposes ie any tax relief that might be applicable

Question 13

Which of the following would normally be regarded as the priority financial need for a client who has surplus cash for the first time?

a) A unit trust.
b) An emergency fund.
c) A stocks and shares ISA.
d) A pension plan.

Answer 13

b) An emergency fund.

Question 14

When completing a factfind for a client in relation to investment advice, which of the following should always be taken into account?

The client’s:
a) levels of indebtedness.
b) employment details.
c) attitude to risk.
d) mortgage arrangements.

Answer 14

c) attitude to risk.

Question 15

Which of the following ought to be the highest financial priority for a retired couple?
a) Pension accumulation.
b) Protection advice.
c) Generating income.
d) Mortgage advice.

Answer 15

c) Generating income.

Question 16

What is meant by ‘capacity for loss’ and why is it important?

Answer 16

The extent to which the client would be adversely
affected should they make a loss on their investments. This must be taken
into account when assessing attitude to risk

Question 17

List the factors that an adviser might take into account when deciding on an appropriate solution for a client.

Answer 17

Eligibility for state benefit;
existing arrangements;
affordability;
taxation;
attitude to risk;
capacity for loss;
anticipated changes in circumstances;
timescale;
flexibility

Question 18

List five points that should be included when presenting a recommendation to a client.

Answer 18

The purpose of the product and the needs that it will address;
the benefits to the client;
risks and limitations inherent in the product;
any product options that might be appropriate;
a summary of reasons for recommending that product.

Question 19

For how long must records relating to pension transfers be retained?
Indefinitely

Answer 19

Indefinitely

Question 20

What is the difference between proactive and reactive servicing?

Answer 20

Proactive is instigated by the adviser, perhaps on the basis of information obtained during the factfind about a forthcoming promotion
or inheritance.

Reactive servicing is instigated by the client in order to
address a need, or by the client’s representatives, eg the executors of an
estate.