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LP2 > The Process of Identifying Appropriate Financial Solutions > Flashcards

The Process of Identifying Appropriate Financial Solutions Flashcards

1
Q

What is the purpose of a product key facts illustration?

A

Provide customers with information specific to their circumstances, including a personalised quote showing how much has been invested and typical scenarios in relation to proceeds and returns.

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2
Q

What is the term given to firms within the financial services industry who develop and sell financial services products?

A

Providers

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3
Q

What is the first stage of the financial advice process?

A

Determine the client’s requirements

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4
Q

Which of the ‘7 Ps’ of marketing is described as ‘The fees charged and terms associated with its sale’?

A

Price

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5
Q

How is product information made available within the life and pensions sector?

A

Through key feature documents, product key fact illustrations and factsheets.

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6
Q

What does Guidance involve?

A

Providing detailed information on an area of financial planning, without offering an opinion or personalised recommendation.

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7
Q

The advisory process involves using what TWO things that are captured from the customer, in order to provide a specific solution appropriate to their circumstances?

A

Product information and specific details.

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8
Q

Professional financial advisers fall into what two categories?

A

Independent and Restricted.

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9
Q

What are Independent advisers able to offer advice on?

A

The full range of investment products from the full range of providers.

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10
Q

What are Restricted advisers able to offer advice on?

A

Only certain types of investment products or only products from a limited number of providers.

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11
Q

What are platforms?

A

Internet-based services used by financial advisers, and sometimes customers, to view and administer investments.

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12
Q

What does a custody service allow firms to do?

A

Hold assets on behalf of their customers.

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13
Q

What is marketing used for?

A

To create awareness of products and inform customers of their benefits.

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14
Q

How can segmenting it’s customers benefit a firm?

A

Providing products and related marketing which are directed at the most profitable segment.

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15
Q

What are four types or marketing?

A
  1. Direct mail
  2. Direct response marketing
  3. Telemarketing
  4. E-Marketing
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16
Q

Which are the most important regulatory rules surrounding marketing?

A

The FCA’s Principles for Businesses.

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17
Q

Before doing investment business with a client, a firm must establish whether the client is one of what THREE types of clients?

A
  1. Retail client
  2. Professional client
  3. Eligible counterparty
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18
Q

What is a fact-find?

A

A document which enables the adviser to collect details of the customer’s current financial situation and their future financial goals in a structured way.

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19
Q

What are the FOUR different categories of asset classes we look at when determining an underlying investment approach?

A
  1. Cash
  2. Bonds
  3. Property
  4. Equity
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20
Q

What is holistic financial planning?

A

The process of providing advice and recommendations linked to all of a customer’s financial affairs.

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21
Q

What do ongoing suitability reviews involve?

A

Revisiting the initial advice agreed with the customer to assess whether the products remain in line with the customer’s goals and circumstances.

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22
Q

What two things does the quality of customer service influence?

A

Retention and referrals.

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23
Q

What THREE things are service levels defined by?

A
  1. The complexity of the product/plan
  2. The amount invested
  3. The preference of the customer
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24
Q

What FIVE things do customer service levels include?

A
  1. Initial/ongoing product support
  2. Ongoing guidance
  3. Transactional advice
  4. Ongoing annual review
  5. Ongoing quarterly/six-monthly review
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25
Q

What is meant by a firm’s service level standards?

A

The performance measures they strive to meet on an ongoing basis.

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26
Q

What is a Service Level Agreement (SLA)?

A

A contract between the firm and the customer. Defines the services that the firm will provide and the required standards for those services.

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27
Q

List FOUR pieces of information that must be contained within a product’s key information document (KID)?

A

(Any four of the following)

  • Product name
  • Product aims/objectives
  • Product’s target market
  • Customer commitments
  • Risk warnings
  • Complaints procedure
  • Compensation process
  • Cancellation rights
  • Product Q&A
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28
Q

What are the key differences between single-tied, multi-tied and whole of market restricted advice?

A
  • Single-tied advice: can only advise on the products of one provider. The provider is often the same as the firm providing the advice.
  • Multi-tied advice: can advise on the products of a researched panel of providers.
  • Whole of market advice: can advise on all products within a specific market e.g. protection
29
Q

What do the 7 P’s of marketing refer to?

A
  1. Product
  2. Price
  3. Promotion
  4. Place
  5. People
  6. Process
  7. Physical evidence
30
Q

What is the purpose of a key information document (KID)?

A

To explain to customers the main features of any financial products that they are considering buying in a format that is easy to follow.

31
Q

What do factsheets tend to focus on?

A

Fund breakdowns, investment performance and how the investment is managed.

32
Q

What are the SEVEN minimum regulatory requirements for the key information document (KID)?

A
  1. An outline of the product.
  2. The aims of the product.
  3. The commitment of the customer.
  4. Risks associated with the product.
  5. Complaints and compensation
  6. Cancellation rights.
  7. Product questions & answers (Q&A)
33
Q

What does guidance involve?

A

Providing a customer with information on a product so that they can make an informed choice on how to progress.

34
Q

What is provider guidance?

A

Product information supplied by one of the provider’s customer representatives directly to the customer.

35
Q

What is generic guidance?

A

Generic information given to an individual on a type of product, as opposed to a specific product from a provider.

36
Q

What is the purpose of the Money and Pensions Service (MaPS)?

A

To provide free and impartial Government services supplied over the phone, face-to-face and online.

37
Q

Whos is the MaPS available to?

A

Individuals over the age of 50, with defined contribution pension schemes in place which require them to decide on how to take their benefits in retirement.

38
Q

What is a distributor?

A

A firm appointed by the product provider to promote and sell it’s products through different channels.

39
Q

What are retail investment products?

A

‘Collective investments’ which are packaged products that allow investors to access a wide variety of underlying financial assets.

40
Q

How many hours of CPD does the Insurance Distribution Directive require of employees of firms that sell, transact and give advice on insurance products?

A

15 hours

41
Q

What is the use of the Financial Services Compensation Scheme (FSCS)?

A

To protect clients of UK authorised financial services firms in the event that they cease trading or do not have sufficient assets to cover their client obligations.

42
Q

Name THREE ways in which platforms support the investment advice process.

A
  1. Seeing everything in one place
  2. Consolidated reporting
  3. Useful tools
43
Q

What are custodians?

A

Banks that specialise in the safe custody of portfolios of shares and bonds held on the behalf of others.

44
Q

What are aggregated trades?

A

Involves aggregating all the individual deals into one sell order and one buy order. Platform then undertakes single trades, and splits between each underlying client account.

45
Q

What does ‘Principle 7: Communications with customers’, from the FCA’s Principles for Businesses state?

A

“A firm must pay due regard to the information needs of its customers and communicate information to them in a way which is clear, fair and not misleading.”

46
Q

Define product representatives.

A

Individuals who provide a service to customers surrounding a specific product.

47
Q

What is the name of the client agreement given to retail clients by firms?

A

Terms of Business Agreement (TOBA)

48
Q

What FIVE things must a Terms of Business Agreement (TOBA) include?

A
  1. Type and level of service being provided.
  2. Costs of the service.
  3. Duties of the service provider to the client.
  4. Access to the FOS in the event of a complaint.
  5. Access to the FSCS in the event of the firm becoming insolvent.
49
Q

What is the overall objective of the advice process?

A

Identify and obtain the customer’s agreement to a series of recommendations that meet their key requirements as closely as possible.

50
Q

What are the FIVE recurring steps of the advice process?

A
  1. Determine client’s requirements.
  2. Analyse client’s financial position.
  3. Formulate a strategy to meet objectives.
  4. Produce recommendations and implement.
  5. Revisit recommendations, objectives and strategy.
51
Q

What typical SIX sections are usually found in a fact-find?

A
  1. Personal information.
  2. Goals.
  3. Hard facts.
  4. Needs analysis.
  5. Risk profile.
  6. Planning considerations.
52
Q

What is the model used by advisers to determine a customer’s goals efficiently?

A

The SMART model.

53
Q

What do the letters in The SMART model mean?

A 
Specific
Measurable
Actionable
Realistic
Time bound
54
Q

What do the letters in the FACTOR model mean?

A 
Flexibility
Access
Cost
Tax
Options
Risk/Reward
55
Q

What does the A in the FACTOR model mean?

A

Access - the customers views on whether they need a specific solution which they can access in a certain period of time (i.e. lump sum or regular income)

56
Q

What does the O in the FACTOR model mean?

A

Options - whether the customer has any additional requirements for the solution.

57
Q

What FOUR things need to be considered when establishing a client’s risk profile?

A
  1. Knowledge and experience of investing.
  2. Willingness to take risk,
  3. Ability to accept loss.
  4. Need to take risk.
58
Q

What are the FOUR typical asset classes?

A
  1. Equities
  2. Property
  3. Bonds
  4. Cash deposits
59
Q

What is a suitability report?

A

The key written document used when giving advice.

60
Q

Why is the role of the adviser to build a relationship with the customer?

A

To allow them to identify the information needed to provide sound advice and guide them through the choices they face.

61
Q

When should the ongoing service required by the customer be agreed?

A

When a recommendation is presented and agreed with the customer.`

62
Q

How do most firms measure their customer service?

A

Through retention and referrals.

63
Q

What THREE factors may service levels be driven by?

A
  1. The complexity of the product/plan.
  2. The amount invested.
  3. The preference of the customer.
64
Q

What does guidance include?

A

Providing a customer with detailed information relevant to them making an information decision on how to proceed.

65
Q

What does advice involve?

A

Providing a customer with a personalised recommendation, based on detailed analysis, on how they should proceed.

66
Q

To what situation does initial/ongoing product support relate?

A

When a customer has purchased a product without guidance or advice.

67
Q

What is a Service Level Agreement (SLA)?

A

A contract between the firm and the customer which defines the services that the firm will provide and the required level and standard.

68
Q

What are the SIX typical components of a Service Level Agreement (SLA)?

A
  1. Objectives
  2. Deliverables
  3. Standards
  4. Complaints/Compensation
  5. Process for changes and reviews
  6. Termination rights
69
Q

What FIVE things do customer service levels include?

A
  1. Initial/ongoing product support
  2. Ongoing guidance
  3. Transactional advice
  4. Ongoing annual review
  5. Ongoing quarterly/six-monthly review

LP2 (6 decks)

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