The advice process and adviser skills

Question 1

What are the 4x basic stages in the advice process?

Answer 1

Gathering information (Factfind)

Analysis of needs, wants and objectives

Identifying solutions and preparing recommendations

Presenting recommendations and gaining agreement

Question 2

What are the 7x categories of a customer’s needs/objectives?

Answer 2

1.day-to-day finance management

2.protecting dependants from death/loss of income

3.protecting self and dependants from illness/injury

4.providing an income in retirement

5.increase/protect the value of money saved/invested

6.mitigate taxes

7.ensuring wills and other post-death affairs are in order

Question 3

Advisers must identify a customer’s capacity for loss and attitudes to risk. What are typical 5x risk categories?

Answer 3

No risk/risk averse

Low risk/cautious

Medium risk/balanced

Medium to high risk

High risk/adventurous/speculative

Question 4

In practical terms, what information will usually be given to the customer before, or at the start of, the first meeting?

Answer 4

‘initial disclosure’ - information about the firm’s services and charges

Question 5

As well as a ‘gap analysis’ assessment, what else should an advisor assess once the information has been gathered? x3

Answer 5

1. the customer’s tax position
2. a summary of existing provisions
3. the inheritance position should the customer, partner or both die

Question 6

The adviser’s aim should be to help the customer to…?

Answer 6

put the right amount of money in the right form in the right hands at the right time

Question 7

When recommending certain products, an advisor must produce a suitability report? What are the 4x products?

Answer 7

1. long-term life insurance, including annuities
2. unit trusts, investment trusts and OEICs
3. personal pensions
4. workplace pension transfers or opt-outs

Question 8

The ‘presentation meeting’ is the final part of the advice process. What points are covered? x6

Answer 8

1. financial situation, needs and objectives
2. detailed analysis of each of the areas of concern
3. issues that arose from the analysis that were not covered before
4. recommended solution to each of the problems identified
5. technical information - charges, penalties, taxation
6. recommended action for issues that could not be addressed due to budget constraints

Question 9

An advisor typically shares what key documents which are prepared by the product providers? x2

Answer 9

1. key features document - life insurance or pension product
2. key investor document (KID) - packaged retail and insurance-based investment products (PRIIPs - unit trusts/OEICs/VCTs)

Question 10

What are the record keeping requirements? x4

Answer 10

1. life policies - 5 years
2. pension transfers/opt-outs/free standing additional voluntary contributions (FSAVC) – indefinitely
3. MiFID-related business - 5 years
4. non-MiFID investments - 3 years

Question 11

Where a customer wishes to arrange a ‘complex’ investment on an execution-only or non-advised basis, what must be done by the firm?

Answer 11

Appropriateness test

Question 12

What information must a firm provide to an Insistent client? x3

Answer 12

confirm the firm has not recommended the transaction

the reasons why it’s not recommended

the risks of the transaction