Topic 14 (Understanding and satisfying customer needs)

Question 1

What is the order of the Financial life cycle?

Answer 1

> Children
> Students (16-20)
> Young adults in employment (20-30)
> Young families (30-40)
> Established families (40-50)
> Mature households (50-60)
> Retirement (60+)

Question 2

What is the pattern where most savers and investors build up and hold their assets?

Answer 2

• Cash
• Short-term savings - fixed rate bonds
• Secure/short term investment (bank/building society accounts)
• Greater long term potential
  (shares/unit trusts)

Question 3

What is a Fact-find?

Answer 3

To offer advice, the advisor will complete a fact-find of the customer which includes their circumstances, experience, needs and objectives

Question 4

What Personal/family details are needed for a fact-find?

Answer 4

• name and address
• date and place at birth
• marital status
• family details
• children

Question 5

What finance information is needed in a fact-find?

Answer 5

• employment details
• income/expenditure
• assets
• liabilities
• plans and objectives

Question 6

What details are required in a fact-find in terms of Assets?

Answer 6

• ownership
• purpose of investment
• type of investment
• values
• rate of return
• tax status
• sum assured/ lives assured

Question 7

What information is obtained in a fact-find in terms of Liabilities?

Answer 7

• the lender
• the amount of loan
• balance outstanding
• type of loan
• rate of interest
• payment method

Question 8

What are ‘soft facts’?

Answer 8

A discovery of clients feelings about what they have/want to do financially
(aims to find out why?how?do you feel that?)

Question 9

Why will knowing the clients feelings help build an understanding?

Answer 9

• Shows how’s much they know
• Indicates their motivation
• Helps construct recommendationsreccomendations

Question 10

The client must understand risks involved, what explanations are given by advisors?

Answer 10

> is there risk to the capital invested
the value of investment may rise/fall
the amount of capital income/growth isn’t guaranteed

Question 11

What is Capacity for loss?

Answer 11

Where the clients ability to absorb falls in the value of their investment

Question 12

What are the 5 categories when identifying needs and objectives?

Answer 12

1. Protecting dependants in the event of death
2. Protection against the financial effects of being unable to work
3. Providing an income in retirement
4. Protecting and/or increasing the value of money invested
5. Saving tax

Question 13

What is the Advisor’s role?

Answer 13

• To define the clients needs and objectives accurately and recommend a priority order of action

Question 14

What factors can have consequences when creating an order of priority?

Answer 14

> Savings and Investments 
> Tax planning 
> Income Protection
> Pension provision
> Life assurance protection

Question 15

How does an advisor HELP a client?

Answer 15

Put the right amount of money
In the right form
In the right hands
At the right time

Question 16

What areas are addressed when recommending a solution?

Answer 16

• state benefits
• existing arrangements
• affordability
• taxation
• risk
• timescale
• flexibility

Question 17

What are the points to explain when representing a recommendation?

Answer 17

• the benefits
• risks/limitations
• product options
• summary of reasons for the recommendation

Question 18

What should a client have when completing a recommendation/sale?

Answer 18

1. A key features document and a key features illustration

2. A product brochure explaining product details/features in full

Question 19

What product types and their retention periods are needed once an agreement is in place?

Answer 19

> Life policies/Pension contracts = 5 years
Pension transfers, opt outs, FSAVC’s = Indefinite
MiFID-related business = 5 years
Other = 3 years

Question 20

What are the 2 categories for client servicing?

Answer 20

1. Proactive

2. Reactive

Question 21

What is Proactive servicing?

Answer 21

The advisor will instigate action by contracting the client to discuss further needs and identify any changes in the clients circumstances

Question 22

What is Reactive servicing?

Answer 22

Involves the advisor acting as a result of a request by the client. The clients circumstances might change unexpectedly resulting in a request for advice.