Case Study 2 Aim 3 Flashcards
Positive vs Negative Screening
Positive - Invests in companies making positive contributions to society / business practises
Negative - Avoids in investments in certain industries
Drawbacks of using ethical views investment
6 points
Restricted Fund choice
Higher charges
Higher risk / more volatile
Limited dividend income
Potentially lower growth
Difficult to screen larger companies
Why’s it important to review investment funds
7 points
They have ESG interest
Funds no longer meet ethical requirements
New funds might be available
Poor performance
Needs to match ATR
Ongoing fund costs
Market conditions
Why might it be better to invest through Collective Investment Fund
8 points
Professional fund management
Large companies have opaque structure
Reduced ongoing monitoring
Lower cost / no stamp duty
Easier to buy / sell
Greater diversification
Single companies are higher risk
Can ATR match
Why might fund manager of ethical fund might not invest in company
7 points
Poor governance
Unethical business practises
Does not meet screening criteria
Poor employee welfare
Tobacco / Gambling
Environmental polluter
Animal testing
Factors adviser should consider + process they should follow for fund switch
11 points
Fact Find
Assess ATR
Establish ethical views
Timescales
Review current funds
Fund choice available
Asset allocation
Select funds to match ATR and ethics
PResent to client
Implement
Suitability Letter
Explain what will happen when fixed mortgage expires + options they have
Moved onto standard variable rate
Likely to be higher than what theyre paying
Can fix again
Likely to be higher than what theyre paying rn
Can start making overpayments to help clear mortgage
May get better deal when comes to remortgaging
This depends on affordability / income
Consider use of some of their assets to reduce mortgage
Cash flow analysis to assess how their costs increase
