Unit 1 Topic 14 - Understanding and satisfying customer needs

Question 1

What suitable products should be recommended to:
School-age young people.
(Somewhere to save their pocket money and gifts from relatives)

Answer 1

• Building society accounts.
• CTF account
• Junior ISA
• Friendly society bond

Question 2

What suitable products should be recommended to:
Teenagers and students.
(Somewhere to put their earnings from a part-time job. Borrowing to buy a car. Borrowing to fund education)

Answer 2

• Bank current account
• Personal loan
• Student loan
• Overdraft facility

Question 3

What suitable products should be recommended to:
Post-education young people.
(Savings for a deposit for a house. Protection against loss of income due to illness. Loan to buy a house)

Answer 3

• Building society account
• IPI
• Mortgage

Question 4

What suitable products should be recommended to:
Young families.
(Protection against loss of income due to illness. Life cover protection for dependents. Bigger house. Provision for retirement).

Answer 4

• IPI
• Life assurance
• Bigger mortgage
• Pension (with employer or via personal provision)

Question 5

What suitable products should be recommended to:
Established families.
(Planning for retirement. Protection against loss of income, bigger mortgage and pension commitments. Life cover protection (for children still at home). Savings/investments over long term for surplus income and/or inheritances).

Answer 5

• Increased pension contributions.
• IPI
• Life assurance
• Savings and investment products (unit trust, bonds, etc)
• Tax planning (IHT)

Question 6

What suitable products should be recommended to:
Mature households.
(Planning for retirement. Savings and investments over the medium term to be accessible at retirement)

Answer 6

• Increased pension contributions
• Savings
• Investment products (unit trust, bonds, etc)
• Tax planning (IHT)

Question 7

What suitable products should be recommended to:
Retirement.
(Creating as much income as possible from pension plans and savings policies. Realising capital from property. Possible long-term care needs)

Answer 7

• Annuities
• Investment that provide income
• Equity release
• Long-term care annuities

Question 8

What is a common Savings pattern?

Answer 8

• Cash
• Current account
• Instant access/short-notice deposit account
• Fixed-term bonds
• Equity-based investments eg unit trusts

Question 9

What is a Fact find?

Answer 9

To ensure that any advice offered is suitable for the client, it is necessary to ask the following questions:

• financial situation
• existing and future needs
• ability to provide for them
• attitude towards providing for them
• objectives
• knowledge and experience of investment

Question 10

What basic information is needed?

Answer 10

• Full name, address, telephone number.
• Date and place of birth
• Marital status
• Family details

Question 11

What client Financial information is required?

Answer 11

• Employment status
• Income and benefits
• Previous and/or additional employment
• Income and expenditure

Question 12

What does the FCA describe as a vulnerable customer?

Answer 12

Someone who is especially susceptible to detriment as a result of their personal circumstances, particularly when a firm is not providing appropriate levels of care.

Question 13

What are the Five areas of financial need?

Answer 13

1) Protecting dependents from the financial effects of either a loss of income or a need to meet extra outgoings in the event of premature death
2) Protecting self and dependents from the financial effects of losing the ability to earn income in the long term.
3) Providing an income in retirement, sufficient to maintain a reasonable standard of living.
4) Wanting to increase and/or protect the value of money saved or invested; wanting to increase income from existing savings or investments; wanting to build up some savings in the first place.
5) Saving tax

Question 14

What should be explained to the client when making a specific recommendation?

Answer 14

• The purpose of the product and the client’s needs that the product will address
• The benefits that the client will enjoy
• The risks and limitations inherent in the product
• Any options that exist within the product that may be appropriate to the client
• A summary of reasons why the product is being recommended.

Question 15

What is Proactive servicing?

Answer 15

Proactive servicing involves instigating action by contacting the client to discuss further needs.

Question 16

What is Reactive servicing?

Answer 16

Reactive servicing happens as the result of a request from the client, for example a request to discuss the recommendation after comments made in the media or by competitors.