Types Of Client & Business Flashcards
What are the 4 categories of clients?
Retail
Elective professional clients
Per Se professional clients
Eligible counterparties (elective and per se)
What is a retail client?
The most common type.
If the client is not classes as professional or counterparty they are automatically classed as retail.
What is an elective professional client?
A client who is deemed professional due to their knowledge, experience and expertise.
An industry expert eg: another financial advisor
What is a per se professional client?
Clients who are deemed professional due to the nature of their role, business model or organisation.
They include governments, local authorities, high street banks and other FCA authorised firms.
What is an eligible counterparty?
Clients can be classed as these for certain business types.
What are the 4 types of business?
- Execution only
- Best execution
- Limited advice
- No advice
What is execution only?
The investor knows exactly what they want and do not seek or receive any advice. The advisor completes the transaction only on behalf of the client.
What is best execution?
This applies mainly to stocks and shares advice. A duty of care exists to ensure the best possible price is obtained. Deals must be completed in a timely fashion.
What is limited advice?
Advice that is still provided but only in specific areas. A client may ask an abuser to look at one specific thing. The FOS do not like this approach and the disadvantages must be explained to the client.
What is non advised?
No personal recommendation is made. Sufficient information is provided so the client can make an informed decision. Generic advantages and disadvantages can be discussed with the client.
What are the 4 groups which a firm can fall into?
- FCA Authorised
- Non FCA Authorised
- Member of a designated professional body
- Exempt firms
What are the requirements of an FCA authorised firm?
Subject to same regulator rules as the firm they are passing business to. It must be clear who has responsibility for the advice that the client is receiving.
What are the requirements of a non FCA authorised firm?
This could be firms who have chosen not to be regulated. These firms are not subject to FCA rules but could be subject to other rules.
What are the requirements of a member of a designated professional body?
These firms are subject to similar rules as the firm they are introducing business to. It must be clear who has responsibility for the advice that the client is receiving.
What is the requirement for an exempt firm?
This is usually an appointed representative.
