Topic 9 Flashcards
The role of the mortgage adviser
The stages of the advice process in the correct order are:
Factfind, Research, Present, Implement.
True or False?
True.
Which of the following is not included during the factfind process?
Customer’s income and outgoings.
Customer’s employment.
Customer’s attitude to interest rate rises.
Customer’s medical history.
Customer’s ideal mortgage term.
Customer’s medical history.
When identifying the solution to a customer’s mortgage needs, the adviser must:
find the lowest-cost solution.
be prepared to explain to the customer all the potential solutions.
be able to show clearly how the product meets the client’s precise needs and objectives.
be able to show clearly how the product meets the client’s precise needs and objectives.
The adviser must identify the most suitable product to meet the customer’s precise needs, objectives, preferences and affordability, as identified through the factfind. This may not be the lowest-cost product and there is no requirement for the adviser to detail all the products they considered.
Ben is advising a customer on a suitable mortgage to buy her next house. It is sufficient for Ben to provide the customer with a key features illustration.
True or false?
False. Any new mortgage is an MCD regulated mortgage, so Ben must provide the customer with a European Standardised Information Sheet.
From a regulatory perspective, ethical advice is best achieved:
through tight regulations.
by regulatory guidelines and good examples.
by allowing firms to set their own rules.
by regulatory guidelines and good examples.
It is almost impossible to impose ethical values through legislation and detailed rules. Instead, the regulator provides guidelines as to what constitutes ethical behaviour and promotes examples of good practice. While firms must take responsibility for their own behaviour, they should be advised as to what the regulator expects.
Which of the following is true regarding the new Consumer Duty?
a) It contains four cross-cutting obligations.
b) It establishes three outcomes to provide a set of rules and guidance.
c) It applies to all new and existing contracts with retail customers.
c) It applies to all new and existing contracts with retail customers.
There are three cross-cutting obligations and four outcomes.
The fair treatment of customers means that an adviser:
must recommend the most appropriate product from their range.
must always recommend the type of product the customer stated they require.
may recommend a product in which the customer has not expressed an interest.
may recommend a product in which the customer has not expressed an interest.
If the adviser does not have a suitable product within the range they offer, no recommendation should be made. In doing what is best for the client, the adviser may recommend a product entirely different from the one in which the client initially expressed an interest.
The primary requirement of the advice process is that:
a) the product recommended should be the best fit to the customer’s needs from the range available.
b) the recommendation should be suitable for the customer’s needs.
c) the amount of time the adviser invests in the customer should be reflected in the commission earned.
b) the recommendation should be suitable for the customer’s needs.
If a mortgage adviser asks a customer about the age at which they expect to retire, this is most likely to be so that the adviser can:
a) ensure that the customer can afford the repayments from their pension income.
b) establish whether the customer is good at long‑term planning.
c) recommend an appropriate term for the mortgage.
d) ascertain whether the type of property the customer is interested in buying is suitable for them.
c) recommend an appropriate term for the mortgage.
The adviser is most likely to ask about retirement plans to help them suggest an appropriate term for the mortgage, since many lenders are reluctant to agree to borrowing that will not be repaid before the customer retires.
Why might an adviser want to know about a customer’s future career plans or expectations of promotion, as well as their current situation?
a) It might influence the price of a product.
b) It might influence a mortgage lender’s decision.
c) It might influence the type of product the adviser would recommend.
c) It might influence the type of product the adviser would recommend.
Information about future expectations of earnings might influence the type of product that the adviser would recommend (eg a low-start mortgage might be suitable for a trainee in a job with a recognised career path and expectation of a higher salary on qualification).
What are the four key pieces of information that an adviser needs from their customer in order to provide a recommendation that meets the customer’s needs?
a) Wants, circumstances, objectives and attitude to risk.
b) Needs, circumstances, objectives and attitude to risk.
c) Needs, wants, circumstances and attitude to risk.
b) Needs, circumstances, objectives and attitude to risk.
The Consumer Duty includes three ‘cross-cutting’ obligations, which develop the overarching expectations from Principle 12. Which of the following is not one of them? Firms must:
a) act in good faith towards retail customers.
b) avoid causing foreseeable harm to customers.
c) ensure products provide fair value for customers.
c) ensure products provide fair value for customers.
The requirement for a firm to ensure products provide fair value for customers is a Consumer Duty outcome rather than a cross-cutting obligation.
The Consumer Duty effectively replaces which Principles for Businesses in relation to a firm’s retail business?
a) Principles 4 and 5.
b) Principles 8 and 9.
c) Principles 6 and 7.
The Consumer Duty replaces Principles 6 and 7.
