Topic 9 - The advice process and adviser skills Flashcards
1
Q
Name the 4 stages in the advice process
A
- Gathering information (factfind)
- Analysis of needs, wants and objectives
- Identifying solutions and preparing recommendations
- Presenting recommendations and gaining agreement
2
Q
What is the name of the requirement found in the FCA handbook, under COBS 9.2 (assessing stability) relating to factfinds, and what does it ask for the adviser to do
A
- ‘Know your customer’
- Find out as much relevant information about the customer as possible to give the best advice
3
Q
The FCA does not set a structure for factfinds, but includes details on which areas
A
- Personal information, including address, age and date of birth, marital status
- Employment status
- Income source and salary, including pensions, investments, etc.
- Personal and household expenditure
- Types of asset, whether they are single or jointly owned; the purpose of the investment and the type of return expected on the investment payments, dividends, or capital gains
- Liabilities, including mortgages, loans and credit card and the term left on these
- Objectives and attitudes, or soft facts, such as what the customer wants in certain situations/life stages and how important that is
- Provision for existing and future needs, which may include life assurance, investments, pensions, etc
- Attitude towards providing for current and future needs and priorities.
- Knowledge and experience of investment.
- Attitude to risk relevant to the service the adviser will provide.
- Whether the customer and any partner have made wills, the terms of the wills, when they were last reviewed, and recommending writing a will if none is in place
4
Q
What is a ‘soft fact’
A
- What the customer wants in certain situations/life stages and how important that is
5
Q
What set of rules require adviser to take any steps necessary to ensure customers understanding of risks
A
- Know your customer
6
Q
What are the broad categories for customers attitude to risk and what features does each entail
A
- No risk/risk averse – not prepared to take any risk at all.
- Low risk/cautious – may be prepared to take a very small element of risk if convinced that it is necessary
- Medium risk/balanced – accepts that some risk may be necessary with some of their available money but would prefer any risk to be controlled.
- Medium to high risk – relatively happy to gamble with a larger part of their capital if the potential reward is attractive, and to accept losses as part of the bigger picture.
- High risk/adventurous/speculative – prepared to take a high level of risk in order to achieve growth.
7
Q
When analysing there customer’s circumstances, needs and objectives, what are 6 main areas an adviser would look analyse
A
- ‘Gap’ analysis
- Providing a capital sum in the future, and what actions to take now
- Affordability (part of the recommendation process)
- Customer’s tax position
- Summary of existing provisions
- Inheritance position should the customer, partner or both die
8
Q
An advisers aim should be to help the customer to
A
- Put the right amount of money, in the right form, in the right hands, at the right time
9
Q
When identifying a solution for a customer, the adviser should look in detail at these areas to to ensure the customer “puts the right amount of money, in the right form, in there right hands at the right time”
A
- State benefits: the nature and level of state benefits to which a customer or family may be entitled in the specific event.
- Existing arrangements: there is no point in recommending products that satisfy needs already met by the customer’s existing arrangements.
- Affordability: the total cost of any recommendations made must be affordable and not jeopardise the customer’s current and likely future financial situation.
- Taxation: any course of action recommended should not unnecessarily add to or create a tax burden. In many cases the aim is to mitigate or reduce.
- Risk: there must be a close correlation between recommendation and the customer’s risk profile.
- Timescale: the product recommended should meet the customer’s needs within a defined timescale.
- Flexibility: recommendations should display the flexibility to deal with possible changes in the customer’s circumstances.
10
Q
What are some of the questions an adviser should ask when putting together a recommendation
A
- Does the product provide the most suitable solution to the problem?
- Is there a better way of approaching the problem?
- Is the solution affordable now and in the foreseeable future?
- Does the term match the customer’s needs?
- Do the benefits match the customer’s needs?Are there any uncertainties in relation to the product or solution?
- Does the product recommended fall within the customer’s risk tolerance?
- Is the product guaranteed to provide the solution, or is there some element of risk?
- Is the customer clear about any shortfalls that will occur as a result of not being able fully to implement the solution due to budget constraints or priorities?
- Is the product too complex for the customer to understand? If this is the case, the customer may not fully appreciate what they have and may cancel the product at some point or allow it to lapse.
- What issues remain unresolved or were not of concern to the customer?
11
Q
What is included in a suitability report letter
A
- What was discussed
- Customer’s needs
- The product being recommended
- Why the product is suitable for the customers’ needs
12
Q
What products require a suitability report to be made
A
- Long-term life insurance, including annuities (not ‘pure protection’ policies);
- personal pensions;
- unit trusts, investment trusts and OEICs;
- pension transfers or opt-outs (from an occupational pension scheme).
13
Q
When should a suitability report be sent, and what are the exceptions when talking about a life policy and pension plan
A
- Should be sent when, or as soon as possible after, the recommendation is made and before the contract is concluded
- Life policy should be sent ASAP unless here necessary information is provided orally or immediate cover is necessary
- For a pension plan, where a cool-off period is needed, report must be sent no later than 14 days after the contact is in force
14
Q
What is the final part of the advice process
A
- Presentation meeting
15
Q
What is covered during the presentation meeting
A
- A summary of the previous discussions, outlining the customer’s personal and financial situation, needs and objectives.
- A detailed analysis of each of the areas of concern, including any gaps in provision and the amounts required to fill those gaps.
- Issues that arose from the analysis that were not covered at the previous meeting
- The recommended solution to each of the problems identified, including sufficient detail to enable the customer to understand how it will address the problem and how they will benefit .
- Technical information that the customer needs to know – charges, penalties, taxation and so on.
- Recommended action for issues that could not be addressed due to budget constraints, or those that arose from the analysis
