work as a financial planner

Question 1

list the professional standards of financial advisers

Answer 1

Decreasing taxes. degree or higher qualification
undertake a professional year
pass a national exam
undertake continuous professional development
comply with a code of ethics

Question 2

list an advisers core values and principles

Answer 2

ethical behaviour
client care
quality process
professional commitment

Question 3

what must an adviser do to behave ethically?

Answer 3

act in accordance with all applicable laws, including this Code, and not try to avoid or circumvent their intent.

act with integrity and in the best interests of each of your clients.

must not advise, refer or act in any other manner where you have a conflict of interest or duty.

Question 4

list your responsibilities with regards to client care

Answer 4

You may act for a client only with the client’s free, prior and informed consent. If required in the case of an existing client, the consent should be obtained as soon as practicable

All advice and financial product recommendations that you give to a client must be in the best interests of the client and appropriate to the client’s individual circumstances.

You must be satisfied that the client understands your advice, and the benefits, costs and risks of the financial products that you recommend, and you must have reasonable grounds to be satisfied.

You must take into account the broad effects arising from the client acting on your advice and actively consider the client’s broader, long-term interests and likely circumstances.

Question 5

list your responsibilities with regards to the quality process

Answer 5

The client must give free, prior and informed consent to all benefits you and your principal will receive in connection with acting for the client, including any fees for services that may be charged. If required in the case of an existing client, the consent should be obtained as soon as practicable

You must ensure that your records of clients, including former clients, are kept in a form that is complete and accurate.

All advice you give, and all products you recommend, to a client, must be offered in good faith and with competence and be neither misleading nor deceptive.

Question 6

list your professional commitments to your clients

Answer 6

You must develop, maintain and apply a high level of relevant knowledge and skills.

You must cooperate with ASIC and monitoring bodies in any investigation of a breach or potential breach of this Code.

Individually and in cooperation with peers, you must uphold and promote the ethical standards of the profession and hold each other accountable for the protection of the public interest.

Question 7

The legal framework supporting the financial planning process is found in the following Acts of Parliament:

Answer 7

Corporations Act 2001 (Cwlth).
Financial Services Reform Act (FSRA) 2001 (Cwlth).
Trade Practices Act 1974 (Cwlth).
Australian Securities and Investment Commission (ASIC) Act 2001 (Cwlth).
Privacy Act 1988 (Cwlth).
Spam Act 2003 (Cwlth)

Question 8

An Australian Financial Services Licence (AFSL) is issued by

Answer 8

ASIC

Question 9

An AFSL authorises the holder and its representatives to provide financial services to retail clients, which include the

Answer 9

recommendation and provision of financial services and products

Question 10

You may need an AFSL if, as part of your business, you do any of the following:

Answer 10

Provide financial product advice to clients.
Deal in a financial product.
Make a market for a financial product.
Operate a registered scheme.
Provide a custodial or depository service.
Provide traditional trustee company services

Question 11

An Australian financial services (AFS) licensee may appoint ___________to provide specified financial services on its behalf.

Answer 11

‘authorised representatives’

Question 12

Any authorised representative of an AFS licensee may ….

Answer 12

appoint or ‘sub-authorise’ individuals to provide financial services on behalf of the licensee, as long as the licensee consents to the appointment.

Question 13

list the requirements of authorised representitives

Answer 13

educational requirements
experience requirements
business model

Question 14

AFS licensees have obligations under s912A and 912B of the Corporations Act 2001 (Cwlth) requiring them to do the following:

Answer 14

Operate their business efficiently, honestly and fairly.
Maintain the organisational competence to provide the financial services covered by their AFS licence.
Ensure their representatives are competent and adequately trained to provide the financial service.
Have adequate financial, technological and human resources to provide the financial services.
Have risk management systems.
Have arrangements in place for managing conflicts of interest.
Have dispute resolution systems and compensation arrangements.
Comply with the financial services laws and ensure their representatives comply with them.

Question 15

There are three dominant business models or types of licensees in the financial advice industry:

Answer 15

institutionally owned licensees, medium to large licensees and small boutique licensees.

Question 16

explain an institutionally Owned licensees business model

Answer 16

This form of licensee is controlled by a large fund manager, insurance provider or bank. The approved product list for this type of licensee may be limited. There also may be an implied preference for the financial advisers to recommend some of the products or funds owned by the institution to which they are affiliated.

Question 17

explain a medium to large licensees business model

Answer 17

Medium to large adviser groups generally are a franchise type of operation, whereby authorised representatives can choose to trade under their own ‘brand name’, or alternatively the licensee group’s name.

The approved product list for medium to large adviser groups may also be restricted, just as they are in institutionally owned models. There are a couple of reasons for this. It could be because the group is still owned by a bank or large fund manager. Or it could be because it is impossible to research every possible investment opportunity within the ‘investment universe’. Often, it is a combination of these factors.

Question 18

explain a Small boutique licensees business model

Answer 18

Small boutique advisory firms pride themselves on their ‘boutique’ and/or ‘independent’ status. They own and operate their own AFSL. However, it is important to appreciate that the word ‘independent’ as far as ASIC is concerned has a particular meaning, and it is not always the case that a small boutique advisory firm will be considered independent.

Small boutique advisory firms don’t have the restricted approved product lists that larger advisory groups do. Small boutique firms may conduct their own research into products they wish to recommend.

One disadvantage is the time consuming and costly nature of being responsible for your own in-depth research and approved products. The advantage of being a boutique is that many clients value the breadth and flexibility of investment opportunities available.

Question 19

explain a fee-for-service model

Answer 19

The fee-for-service model can be based on a fixed or hourly rate per session, or a value may be placed on providing the statement of advice. The fee may be paid up-front or over a predetermined period of time.

Licensees using the fee-for service structure can charge their customers a fee for the following financial advice and services:

The first meeting with a financial adviser
Statement of Advice (SoA)
Implementing financial advice
Ongoing financial advice
Advice review implementation
Financial advisers are required to send annual fee disclosures statements for ongoing advice. This fee disclosure statement will outline the fees paid by clients and services clients were entitles to receive for the previous 12 months. Clients have the ability to not opt in for ongoing advice agreement by not returning the signed agreement.

Question 20

ASIC’s aim is to

Answer 20

protect markets and consumers from manipulation, deception and unfair practices and, more generally, to promote confident participation in the financial system by investors and consumers.

Question 21

In addition to its aim, ASIC:

Answer 21

develops policy and guidance about the laws that it administers
licenses and monitors compliance by participants in the financial system
provides comprehensive and accurate information on corporate activity
monitors and assesses compliance with the Code of Banking Practice
supervises industry-based alternative dispute resolution schemes such as the Financial Ombudsman Service (FOS)
helps with market integrity and a fair, orderly and transparent market
implements provisions of the Financial Services Reform Act (FSRA) 2001 (Cwlth)
is also responsible for implantation and monitoring of the provisions associated with the Future of Financial Advice (FOFA) reforms.

Question 22

what is RG 175 Licensing: Financial product advisers - conduct and disclosure

Answer 22

This is a guide for persons who provide financial product advice to retail clients. This guide considers how certain conduct and disclosure obligations of the Corporations Act 2001 (Cwlth) apply to the provision of financial product advice.

Question 23

what is RG 244 Giving information, general advice and scaled advice

Answer 23

explains the differences between giving factual information, general advice and personal advice; and how to meet the advice obligations, including the best interests duty and related obligations, when giving ‘scaled’ advice (i.e. personal advice that is limited in scope). This guidance aims to facilitate access for retail clients to good quality information and advice about all financial products.

Question 24

A recommendation or a statement of opinion, or a report of either of those things, constitutes financial product advice if:

Answer 24

It is, or could reasonably be regarded as being, intended to influence a person or persons in making a decision about a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products (s766B).
Under the Corporations Act 2001 (Cwlth), all financial product advice is either ‘personal advice’ or ‘general advice’.

Question 25

list the categories of financial advice

Answer 25

personal product advice
personal strategic advice
scaled advice
general advice

Question 26

Personal advice is financial product advice given or directed to a person (including by electronic means) in circumstances where:

Answer 26

the person giving or directing the advice has considered one or more of the client’s objectives, financial situation and needs
a reasonable person might expect the person giving or directing the advice to have considered one or more of these matters.

Question 27

all other financial product advice is considered….

Answer 27

general advice

Question 28

do financial product issuers need an AFSL to issue advice on their products?

Answer 28

no. this is because product issuers can rely on the licensing exemption for product issuers.

Question 29

if someone has a business in Australia of giving clients general advice that is a financial service, that person must hold an_______ with an authorisation to give general advice, or be an _________ of such a licensee, unless an ______ applies.

Answer 29

AFSL

authorised representative

exemption

Question 30

what is scaled advice?

Answer 30

Scaled advice is provided when clients scope out certain needs for advice, otherwise the advice becomes comprehensive advice. It is important to note that the same rules apply to all personal advice on a particular topic

Question 31

what is comprehensive advice?

Answer 31

Comprehensive or holistic advice is the ‘traditional’ advice model offered by financial advisers. Under this comprehensive model, advisers make detailed client enquiries and provide advice to the client on all relevant aspects of their financial circumstances

Question 32

Licensees largely view comprehensive advice as optimal in ensuring client needs are adequately and thoroughly met and addressed. It is argued that:

Answer 32

Comprehensive advice ensures that a client‘s full objectives, needs and financial position are considered, which may be at risk if advice is isolated to a particular area or subject matter.

Comprehensive advice may be the only suitable type of advice for certain clients, depending on their individual circumstances. For example, scaled advice may not be appropriate for clients in the retiree and pre-retiree market who need broad advice on their retirement planning strategies.

The provision of scaled advice may require the same amount of time and effort as comprehensive advice

Question 33

Which regulator carries the main responsibility for consumer protection specifically in the financial services industry?

Answer 33

ASIC