Topic 4 Industry obligations to the customer

Question 1

1. Explain the difference between a retail client and an eligible counterparty.

Answer 1

 Eligible counterparty includes large financial institutions such as banks, insurance companies, investment firms, collective investment funds, and governments, where the counterparty requires a limited service. This customer category provides the lowest level of investor protection.

 Retail client covers most customers and refers to ordinary people who cannot be expected to have anything more than a simple general understanding of financial services. This category provides the highest level of investor protection.

Question 2

2. Focused advice occurs when the adviser decides which areas of the client’s financial planning to focus on. True or false?

Answer 2

False – Focused advice occurs when the client decides to receive advice on a specific area of financial planning rather than all areas.

Question 3

3. A staff member who provides focused advice to a customer does not need to meet the normal adviser requirements to hold an appropriate qualification and be an approved person in a controlled function. True or false?

Answer 3

False – An adviser providing focused advice would need to meet the normal adviser requirements.

Question 4

4. What type of customer is the ‘basic advice’ regime aimed at?

Answer 4

The basic advice regime is aimed at those with low to middle earnings and low financial awareness.