7 Flashcards
FCA COBS statement that advisors firms must do
Ensure only suitable recommendations are made to customers and must obtain information from a client to do so
Customer agreements are?
Standard documents that are tailored to the needs of the individual client
Hard and soft facts
Hard - factual information
Soft - needs, wants and desires
What should an advisor do if aims of client aren’t realistic?
Inform the client and negotiate with client to re-align expectations and agree more realistic ones
3 categories covered within a risk profile
Attitude to risk
Tolerance of risk
Capacity for loss
Stochastic modelling
Measures the range of possible returns over a period of time and the likelihood of these returns
Should you invest based on tax efficiency?
No, should be right investment for the customer and made tax efficient
Which one of attitude to risk and capacity for loss are subjective and matter of fact?
attitude to risk - subjective
capacity for loss - matter of fact
Time horizon
Term
Should some form of liquidity be shown in all portfolios?
Yes
As a general rule of thumb is debt repayment recommended before or after investment?
Before and secured debts always paid first
Professional investment management and financial advice association offer what?
Objective benchmark for advisors to measure their own investment portfolios
Strategic asset allocation
Assess tolerance to risk and timer frame and then create an allocation of investments matching the risk tolerance and time line. E.g. 60% shares and 40% bonds
Tactical asset allocation
Strategic asset allocation but advisor can reassess and use skills to vary asset allocation upto a agreed % aka strategic range
Rebalancing asset allocation
When investing as prices change investment allocation can become skewed and so need to be rebalanced by advisor
