What is the key difference between financial guidance and financial advice?
Guidance provides information for a customer to make their own informed choice, whereas advice provides a specific, personalised recommendation.
What is the purpose of a Key Information Document (KID)?
To provide customers with all the necessary information to make an informed choice about whether to proceed with purchasing or investing in a product.
Firms that advise on retail investment products must classify themselves as either restricted or _____.
independent
What defines an ‘independent’ financial adviser?
An adviser who can offer advice on the full range of investment products from the full range of providers.
What type of restricted advice involves recommending products from a researched panel of providers?
Multi-tied advice.
What independent body is set up to resolve complaints between financial services firms and their clients?
The Financial Ombudsman Service (FOS).
What government scheme protects clients if a UK authorised financial services firm ceases trading?
The Financial Services Compensation Scheme (FSCS).
What is the primary function of an investment platform?
To act as an internet-based service used by advisers and customers to view and administer investments in one place.
Term: Custodian (in the context of platforms)
A bank that specialises in the safe custody of portfolios of shares and bonds on behalf of others, segregating them from the investment firm.
Which FCA client category receives the greatest level of protection, being defined as someone with no specialist knowledge of financial products?
Retail client.
What is a ‘fact-find’ in the advice process?
A document used to collect details of a customer’s current financial situation and future financial goals in a structured way.
What do the letters in the SMART model for goal setting stand for?
Specific, Measurable, Actionable, Realistic, and Time bound.
What does a ‘letter of authority’ allow a financial adviser to do?
It authorises the adviser to contact third-party providers on the client’s behalf for details of their existing arrangements.
What is the purpose of assessing a client’s ‘ability to accept loss’ during risk profiling?
To establish the extent to which the client’s assets or income could fall in value as a result of a market downturn.
The four main high-level asset classes used in investment analysis are cash deposits, bonds, equities, and _____.
property
What is meant by ‘holistic financial planning’?
The process of providing advice and recommendations that are linked to all of a customer’s financial affairs, not just one specific area.
What key document must an adviser provide to a client, detailing the recommendations and explaining why they are appropriate?
A suitability report.
What is the purpose of an ongoing suitability review?
To revisit the initial advice to assess whether the recommended products remain in line with the client’s goals and changing circumstances.
What is ‘transactional advice’?
One-off advice to meet a simple financial need, where the service is provided at the outset with minimal ongoing service requirements.
A contract between a firm and a customer that defines the services to be provided and the required standard for those services is known as a _____.
Service Level Agreement (SLA)
Which two entities are appointed for an Open-Ended Investment Company (OEIC) to manage the fund and protect investors’ interests respectively?
An Authorised Corporate Director (ACD) and a depositary.
Firms that provide advice on the products of another firm are known as what?
Intermediaries.
The Consumer Duty, which came into force on 31 July 2023, focuses on which four key areas?
Products and services, price and value, consumer understanding, and consumer support.
According to the FCA, what defines a ‘vulnerable customer’?
Someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care.
