6 Investment Advice Process

Question 1

Describe 5 steps Investment Advice Process

Answer 1

1) Establish Rapport
2) Data Gathering
3) Analyse
4) Present and implement
5) Monitor

Question 2

Outline Elderly/Vulnerable Client Procedure

Answer 2

If over 80 should be offered a 3rd party to the meeting

If over 85 a 3rd party should be present

Question 3

Considerations

Answer 3

1 Timescale
2 Requirements of death. Need evidence of
3 succession planning
4 Need for emergency fund 3 to 6 months expenditure
5 Existing holdings in light of objectives
6 Health and Life Expectancy
7 ATR and experience
8 Capacity for Loss
9 VCT and EIS
10 Ethical and Social Responsibility
11 Asset Allocation

Question 4

Investment Corridors

Answer 4

age 70-79 commence investments of 65% to 80% of their investable wealth
age 80-84 commence investments of 50% to 75% of their investable wealth
age 85-89 commence investments of 35% to 60% of their investable wealth
age 90 + commence investments of 20% to 40% of their investable wealth

Upper corridor maybe be exceeded for high wealth clients £2M+

Question 5

Assumptions in Optimising for Scholastic Modelling

Answer 5

Risk
Historic Data
Forecast
Risk

Question 6

Name 2 benefits and drawbacks of using scholastic modelling

Answer 6

Advantages
Give investors more choices to compare 
Preferred returns will determine underlying assets
Disadv
Depends on accuracy of assumptions
Provides prediction not certainty

Question 7

Fund construction

Answer 7

1 Top Down - asset alloc, geog, sector wtg

2 Bottom Up - select stocks based on their criteria

Question 8

Fund Management Styles

Answer 8

1) Value - rigorous research on price compared to market price
2) GAARP - companies with long term sustainable advantage. Mainly for active mgrs
3) Momentum - looks at sector rotation and points of the economic cycle
4) Contrarian - average opinion is wrong. Hedge fund managers often use

Question 9

Passive and Index fund adv and disa

Answer 9

advs
low charges
have to follow index chosen
allows diverse holdings
disa
no option to move to safe harbour when turbulence
many index concentrated sectors

Question 10

SJP Core Princples

Answer 10

1) Set aside cash reserve
2) pensions and ISA’s if suitable
3) UT to feed future ISA allow
4) Investment bonds
5) Take tax and charges into account
6) FAB only for experienced
7) VCT and EIS

Question 11

Replacement Business

Answer 11

Must be valid reason to transfer/redirect

Critical Yields and if not own charges comparison

Question 12

CYC comp

Answer 12

replacement costs should be below the figures set out below: Client’s ATR Client’s Age Low Lower-medium or above Less than
75 0% 0.75%
75 – 80 0% 0.50%
80 or more 0% 0.25%

Question 13

When Replace

Answer 13

Where the existing plan was set up either:
 Less than 5 years ago by the current Partner when at a previous firm (or by another associate of that previous firm); or
 Less than 3 years ago by another person.