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FSRE - Josh > Topic 3 - Meeting customers needs and priorities > Flashcards

Topic 3 - Meeting customers needs and priorities Flashcards

1
Q

What are the 3 broad categories of customers

A
  • Personal
  • Business
  • Those who act on behalf of others
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2
Q

In terms of the ‘financial life cycle’, what is included for young adults in employment (20-30)

A
  • More spending power
  • Unlikely to have savings
  • Often renting
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3
Q

In terms of the ‘financial life cycle’, what is included for the 2 stages for young families (30-40)

A

Stage 1

  • Looking to rent/buy before making a family
  • Savings and mortgage planning prioritised
  • Consider assurances

Stage 2

  • Starting family, often bought first house
  • Income protection crucial
  • Less savings due to 1 income (Maternity)
  • Think about long-term savings (children)
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4
Q

In terms of the ‘financial life cycle’, what is included for established families (40-50)

A
  • Better off financially
  • Return of 2 incomes - increase mortgage
  • Expenses at their highest - kids
  • Priority of financial protection
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5
Q

In terms of the ‘financial life cycle’, what is included for mature households (50-60)

A
  • Highest earning potential - more disposable income
  • IHT & retirement planning
  • Life assurance in place
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6
Q

In terms of the ‘financial life cycle’, what is included for retirement (60+)

A
  • Converting income to lump sums
  • ‘Asset rich, income poor’
  • Downsize house to increase capital
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7
Q

What is include in the hierarchy of needs, from most to least important

A
  • PIPSI - acronym
  • Day-to-day living
  • Protection
  • Insurance
  • Pension
  • Savings
  • Investment
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8
Q

Explain what a sole-trader is and what their business needs are

A
  • Sole-traders run small businesses (typically their own) and sometimes employ others
  • Banking
  • Loans
  • Protection
  • Insurances (tools etc.)
  • Pensions
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9
Q

Explain what partnerships are and what main protection they will need

A
  • Two or more self-employed agreeing to work together formally
  • Protection needed for death - life assurance taken out by all members
  • Assurance pays out sum to buy out beneficiaries share of business
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10
Q

Briefly explain limited companies and their business needs

A
  • From ‘one man bands’ to large corporations
  • Banking
  • Loans
  • Protection
  • Staff benefits
  • Insurance
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11
Q

Briefly explain what a trustee is and their financial needs

A
  • People who look after assets left in trust
  • Trustee bank account
  • Investment
  • Deposit account
  • Occasional mortgage and borrowing facilities
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12
Q

When creating a factfind, advisers should ask about the clients

A
  • Financial & personal circumstances
  • Priorities
  • Capacity to absorb losses
  • Attitude to risk
  • Objectives & Needs
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13
Q

What are a firms obligations (set by the FCA) to its customers

A
  • Act in best interest of customer
  • Look after assets responsibly
  • Not abuse their trust
  • Be honest
  • Investigate mistakes and make it right
  • Ensure customer understanding of assets bought
  • Ensure customer understanding of costs and charges
  • Be sympathetic to customers regarding problems
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14
Q

What act from the FCA pushed for improving consumer knowledge to financial services, and what service did they create for this

A
  • The financial guidance and claim act 2018
  • Money and Pension Service (MaPS)
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15
Q

What areas do MaPS provide advice on

A
  • Pensions - general information about workplace/personal pensions
  • Money - enhance understanding of day-to-day money management skills
  • Debt - information and advice
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16
Q

What does Life assurance provide upon death

A
  • If regular premiums are paid, income and/or lump sum paid to family
17
Q

What does insurable interest mean

A
  • Applicant would suffer directly from the death or insured event
  • Members of partnerships have II in each other, as well as creditors to a borrower
18
Q

What are the 4 life assurance arrangements

A
  • Single-life, own benefit
  • Life of another
  • Joint-life first death
  • Joint-life second death
19
Q

What is term assurance and what are its main features

A
  • Form of life cover over agreed term
  • Low cost
  • Only payable if claim is during term
  • Monthly or annual premiums
  • No cash value built up - not an investment
  • Single life or Joint-life first death available
20
Q

What is whole life assurance and what are its main features

A
  • Runs for whole life of the insured, paid on death
  • Only cancelled if premiums not paid
  • Premiums provide protection & investment
  • 2 investment principles - unit-linked and with-profit
  • Provides tax-free legacy & funds for IHT
21
Q

Explain the difference between unit-linked and with-profit investments

A
  • Unit-linked - Investment directly linked to stock that company is investing in themselves - volatile but chance for higher returns
  • With-profit - Investment based on company’s performance - safer but potential lower returns
22
Q

What are the key features of Critical Illness Assurance

A
  • Tax-free lump sum paid on diagnosis - doesn’t need to be repaid if they survive
  • Must meet strict definitions
  • Same structure as Life Assurance plans, except paid on diagnosis not death
  • Can be integrated with other insurance term
23
Q

What are the main features of Income Protection Insurance (IPI)

A
  • Replacement income (tax-free) for long-term disability or death
  • Agreed term (usually to retirement date)
  • Maximum usually 50-60% of pre-disability income
  • Paid until recovery, end of term or death - whichever is first
  • Cannot be cancelled unless premiums not paid
  • Benefits paid after deferred period
24
Q

What are the main features of Accident, Sickness and Unemployment insurance (ASU)

A
  • Similar to IPI
  • Tax-free income if unable to work (60-65% of income) - redundancy cover available
  • Annually renewable - can be cancelled
  • Maximum age to take out usually
  • Deferred period usually 30 days
  • Benefits stop after 1-2 years
25
Q

What is the main effect of inflation on investments, and what type of return should investors look to receive to keep on top of this

A
  • Reduced buying power of money
  • Real return - making sure your investments are at least staying in line with inflation before profits
26
Q

What is a structured deposit

A
  • Savings account linked to index of measuring stocks - FTSE 100
  • Account purchased through financial adviser usually
  • Volatile due to performance of shares but higher return than traditional savings
27
Q

What is a collective investment scheme

A
  • Investors put money into a pool and expert fund managers invest in wide range of assets
  • Diversification from spread of risk
28
Q

2 categories of collective investments

A
  • Unit-trusts and Open-ended investment companies (OEIC)
  • Investment trusts
29
Q

What are the key features of Unit-trusts and OEIC investments

A
  • Done by lump sum or regular contributions
  • Unit-trusts divided into units, OEIC’s into shares
  • Value of unit/share is value of all of the company’s assets divided by number of units/shares
  • Open-ended - new units/shares can be made
  • obliged to buy shares back
30
Q

Key features of Investment Trusts

A
  • Public Limited Company that make revenue through trading
  • Investors buy shares from stock market - shares limited
  • Investors receive dividends
  • Company not obliged to buy shares back
31
Q

Benefits of collective investments

A
  • Spread of risk
  • Economies of scale and aggregation results in lower fees and requirements
  • Professional management
32
Q

What is an ISA and what are its main features

A
  • Individual Savings Account
  • Tax wrappers - growth is tax-free whilst inside the ISA
  • Can hold deposits, shares and collective investments
  • Annual limit on amount invested, no limit on total amount invested
33
Q

What is a VCT and what are its main features

A
  • Investment specialised in growing small, but established companies
  • 30% tax relief up to £200k annually - relief scrapped if shares sold within 3 years
  • No CGT
  • Tax-free dividends
34
Q

What is an Enterprise Investment scheme and what are its main features

A
  • Investment specialised in new startup companies
  • 30% tax relief up to £1 million annually - relief scrapped if shares sold within 3 years
  • No CGT if shares are hold for 3 years
35
Q

What are the basic pension rules

A
  • Anyone under 75 can contribute
  • Overall contribution limit
  • Personal contributions eligible for tax relief up to annual limit
  • ‘Lifetime allowance’
  • Benefits can be claimed from 55, 25% tax relief
36
Q

What is meant by ‘charge’ in terms of secured lending

A
  • Lender has legal rights over property up to the value of the debt
  • Ranked in order - first charge, second charge
  • Registered with land registry
37
Q

What is secured lending and what are its main features

A
  • Mortgages
  • Where the lender has a charge over the property (collateral)
38
Q

What is the main features of a repayment mortgage

A
  • Only interest is paid on the capital lent - repayment of capital comes from other means
  • Typically used to buy a new house whilst waiting for the old house to be sold - risky
39
Q

What is unsecured lending

A
  • Money lent on personal promise - no charge on property
  • High risk - higher interest rates and short-term

FSRE - Josh (18 decks)

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