1
Q
How is product information made available to individuals for the life and pensions sector? (3)
A
- Key features/information/investor documents 2. Key features illustrations: Specific to each customer. Shows invested amount and future projections 3. Factsheets: Fund breakdown and past performance
2
Q
What document does that FCA required for 1. RPIIPs? 2. non-PRIIPs. 3. Collective investment schemes?
A
- Key INFORMATION document 2. Key FEATURES document 3. Key INVESTOR INFORMATION document
3
Q
When must the Key documents be given to clients? (3)
A
- Before a new application is completed. 2. When changes to an existing pension or life policy are made 3. Immediately after the sale if sale was made without written application
4
Q
What must the KFD/KID/KIID include?
A
- Nature of investment
- Aims of investment
- Risk factors
- Information on performance
- Principal terms of the investment
- Charges
- Cancellation rights
- Compensation arrangements
- Complaints procedure
5
Q
What extra information must be included in the KID for life policies?
A
- Name of insurer 2. Address of head office 3. Solvency and financial condition information 4. Definition of each benefit and option 5. Policy term 6. Means of payment of premiums and duration 7. Means of calculation and distribution of bonuses 8. Surrender value information 9. Premiums 10. Tax arrangements
6
Q
What changes were made to the KIID regulations when PRIIP regulation was onshored to UK? (2)
A
- Change is methodology for past performance calculations (Replaced by narrative description) 2. Extended use of KIIDs for UCITs funds until December 2026
7
Q
What is the new minimum risk score required by Venture Capital Trusts?
A
6/7
8
Q
What are the rules regarding future projections? (2)
A
- Based on a reasonable number of simulations supported by objective data 2. Risk warning explaining examples are not a reliable indicator of future results
9
Q
What document must every with-profits life office have?
A
Principles and practices of financial management (PPFM)
10
Q
Guidance can be split into 2 categories?
A
- Provider guidance: Supplied by a provider representative 2. Generic guidance: Given about a type of product rather than a specific product
11
Q
Which 4 organisations did the Money and Pensions Service replace, and what is its consumer facing brand?
A
- The Pensions Advisory Service 2. Pension Wise 3. Money Advice Service 4. MoneyHelper
12
Q
What are the 5 core functions of the MaPS?
A
- Pension guidance 2. Debt advice 3. Money guidance 4. Consumer protection 5. Strategy
13
Q
What is the MaPS statutory function? (3)
A
Develop strategy for 1. Financial capability 2. Debt 3. Financial education
14
Q
Who is Pension Wise for and what does it do? (5)
A
Its for individuals over 50 with DC pensions. It gives people help about: 1. What to do with pension pot 2. How to shop around for best pension income 3. Taxes and fees 4. How to avoid scams 5. How to make sure money lasts as long as they do
15
Q
What 6 outcomes should firms use to assess they are treating customers fairly?
A
confidence in fair treatment
Product meets needs
Prodcut meet expectation
information is clear
Information is suitable
barriers to change light
16
Q
In what ways could firms cause consumers harm? (5)
A
- Misleading information 2. Products and services not fit for purpose 3. Products and services that are not fair value 4. Poor customer service 5. Exploiting information asymmetry and vulnerability
17
Q
How does The Consumer Duty aim to address the harm firms can cause consumers? (3)
A
- The consumer principle 2. Overarching cross-cutting rules 3. Four outcomes
18
Q
What is the consumer principle?
A
Principle 12, part of The Consumer Duty: A firm must act to deliver good outcomes for retail clients
19
Q
What are cross-cutting obligations? (3)
A
Part of The Consumer Duty: 1. Act in good faith towards customers 2. Avoid causing foreseeable harm to retail customers 3. Support customers pursue their financial objectives
20
Q
What are the four outcomes
A
Part of The Consumer Duty: 1. Products and services: Specifically designed to meet customers needs 2. Price and value: Price represents fair value 3. Customer understanding: Customers are equipped to make effective decisions 4. Customer support
21
Q
What should firms consider when assessing whether a product offers fair value? (6)
A
- Nature and benefits of product 2. Limitations of the product 3. Total price customer will pay over the lifetime of the relationship 4. Cost of design and distribution 5. Market rate for comparable products 6. Whether alternatives are available for a significantly lower price
22
Q
What must firms do to be able to claim their are an ‘independent’ financial advisor?
A
- Exclusion of some FCA-mandated products (unregulated UCIS,, traded life policies) 2. Certain multi-manager funds may be inadequate 3. Firms using panels must allow off-panel recommendations 4. Using a single platform may be insufficient 5. Model portfolios must still cater for individual clients needs 6. Don’t have to offer pension transfer or long-term care insurance advice
23
Q
What is a single-tied restricted advisor?
A
Advisor can offer different types of product, but only from a certain provider
24
Q
What do providers need to ensure of their single-tied representatives?
A
That they can sell all of their packaged products (or be able to refer client to another representative if they lack competence in an area)
25
What does The Advice Guidance Boundary Review aim to do?
Aims to address the issues on the UK advice gap
26
What are the FCA fee requirements for advisors? (6)
1. Shouldn't charge different rates for different providers that are equally suitable 2. Charges must be disclosed upfront 3. Fees should match level of service provided 4. Ongoing charges can only be applied where client has agreed to an ongoing service 5. Fees should be disclosed in monetary terms, even if fees are set in percentages 6. Advisory fees can be charged by the provider and passed by to the advisory firm (facilitation)
27
What was the aim of introducing stakeholder products in 2005?
1. Provider simpler, lower costs advice. 2. Based on pre-scripted questions. 3. No KYC or Fact-fund necessary 4. Product only has to be suitable, not the most suitable
28
What are the 3 types of stakeholder product:
1. Short term deposit based 2. Medium term collective or life product 3. Long term pension scheme
29
What is the difference between 'Realtime' and 'Non-Real Time' promotions?
Real time promotions are face-to-face or telephone conversations (Not written) Non-real time promotions are all others, such emails or advertisements (Written)
30
What are the 5 levels of financial promotions?
1. Non-real time 2. Real time 3. Direct offer 4. Unsolicited real time 5. E-commerce
31
What are the requirements for Non-real time financial promotions? (4)
1. Approved by compliance officer. 2. Records kept (indefinitely, 6 years, 5 years or 3 years). 3. Must include name and address. 4. Past performance and tax warnings
32
What are the requirements for Direct Offer financial promotions? (5)
1. FCA approval confirmation 2. Name and address. 3. Charges and commission disclosure 4. Risk description 5. Tax warning
33
What are the requirements for E-commerce promotions? (5)
1. FCA disclosure 2. Name and address 3. Customers told how to place an order 4. Customers can verify and correct input 5. Orders must be acknowledged without delay
34
When do the rules regarding advertisements not apply? (4)
1. Communication is for 1 specific recipient 2. Specific products for a specific recipient 3. Personal quotations 4. Promotion containing only the name of the firm, contact point, logo and brief description
35
What must be discussed in a fact-find for an investment business? (5)
Knowledge and experience
Situ
Length
Objective
ethical standards
36
What should an advisor do if a client declines to give details during a fact find?
Make a note and possibly decline making a recommendation and consider whether it is appropriate to do business
37
When is a firm required to provide a suitability report? (7)
If the firm recommends: 1. Buying or selling holdings in a collective investment scheme or an investment trust 2. Insurance based investment products 3. Makes any changes to a personal or stakeholder pension contract 4. Makes a pension withdrawal 5. Purchasing short-term annuity 6. Pension opt-out 7. Take up life policy
38
What must the suitability report state? (4)
1. Advice given and how it meets clients needs 2. Why firm has concluded transaction is suitable 3. Whether advice is likely to make client need a periodic review 4. Any possible disadvantages
39
When should a suitability report be provided for 1. Investments 2. Personal or stakeholder pension 3. Pension transfer or conversion 4. Life policy
1. Before the transaction is concluded 2. No more than 14 days after contract is concluded 3. Before the transaction is effected 4. Before the contract is concluded
40
What should be considered if client insists on an unsuitable product?
The level of unsuitability. You should consider ending the relationship if the client product is highly unsuitable. Minor unsuitability is not an issue and the transaction can be carried out. (disagreement should be recorded and signed by client)
41
Who should fill out application forms, client or advisor?
Best practice is for client, but advisor can do it if client is unable or unwilling. Advisor should ensure client reads, checks and signs to confirm if this is the case
42
What is the difference between risk appetite and capacity to take risk?
Risk appetite is subjective, capacity to take risk to more objective
43
What are the 3 categories of client for IFAs?
1. Retail client (higher disclosure and protection 2. Professional client 3. Eligible counterparty
44
When does an MiFID firm fall into the category of 'Professional Client' of an IFA?
Meeting 2 of the following: 1. Balance sheet total E20m 2. Net turnover E40m 3. Own funds E2m
45
How can IFA 'professional clients' and 'eligible counterparty' clients be classified? (2)
1. Per se professional clients (large professional entities) 2. Elective professional clients (Not automatically professional clients, but can be treated as such)
46
What must be done for a firm to be considered as an 'elective professional client' by an IFA?
Quantitative assessment of expertise And 2 of the following criteria: 1. At least 10 significant size transactions per quarter for last 4 quarters. 2. Size of clients protfolio is E500k 3. Worked in financial sector for at least 1 year
47
What are the 3 categories of client recognised under ICOBS?
1. Consumer 2. Commercial customer 3. Customer (Both)
48
What must an IFA firm disclose on first contact with a retail client?
1. Name and address
2. Methods of communication
3. Regulatory status
4. Whether firm is AR, tied agent, independent or restricted
5. Details of services to be provided
6. How firm is paid
7.Details of loans and ownership
8. How to complain
9. FSCS coverage
10. Conflicts of interest policy
49
What does a client agreement include?
1. Commencement
2. Regulation by FCA
3. Investment objectives
4. Restrictions
5. Services provided
6. Payment
7. withdrawal rights
8. Risk warnings
9. Complaints
50
IFA service: Best execution
A stockbroker must obtain the highest/lowest price possible when buying/selling stocks
51
When do pension transfers require sign off?
DB schemes over £30k need to be signed off by a regulated financial advisor with qualifications. Personal recommendation must be made and cannot be execution only
52
IFA service: limited advice
When a client asks for advice to be limited to one specific area. Generally this is not a good idea for the IFA
53
IFA service, non-advised sales?
Firm offers information on a range of products for client to make their own decision
54
IFA service: Execution-only
Investor states exactly what they want, and does not require advice. No fact find required, but assessment is required if financial instrument is complex
55
What are 5 potential limitations of IFAs?
1. Reliance on others 2. Reliance on information 3. Insufficient information 4. Execution-only transaction 5. Introducer organisations
56
What products have a 14 day and 30 day cancellation period (if advice was given face to face)? (5/5)
14 days: 1. Opening or transferring ISA (except LISA) 2. Collective investment scheme 3. Transferring a child's trust fund 4. Enterprise investment scheme 5. 30 days: 1. Life policy 2. Personal or stakeholder pension 3. Pension transfer 4. Pension income or withdrawals 5. Lifetime ISA
57
What are some exemptions to the right to cancel? (5)
1. ISA with same conditions as previous year 2. Some annuities and pension transfers 3. ISA/EIS/CTF where it has been explained right to cancel has been removed, or changed to 7 days 4. Specific pension contracts 5. Traded life policies
58
How must a right to cancel notice be sent, and what must it include? (2/4)
Must be sent by post or email. Must include: 1. The right to cancel 2. Duration of the right 3. How to cancel 4. Consequences of cancellation
59
When is there no right to cancel (3)?
1. Contract was funded by a pension 2. Pension annuity due to commence within a year and a day 3. Income withdrawals
60
What must be in a suitablity report?
Why a product was chosen and how it is suitable (capacity for loss, as good as the stakeholder)
How it meet your preferences
Disadvantages
If it is regarding a personal pension, then must state why it is as good as a stakeholder pension.
61
To be considered an independent advisor a firm should...
Not offer FCA-mandated products (ucits and TLP)
Cater to individual needs
Offer off-panel
Maybe use more than one platform
Maybe use more than a Multi fund
No need for general pension transfer or insurance
62
When do you need to justify the use of a product that "is as good as a stakeholder pension"? And when would this not be neccesary?
When suggesting a personal pension
Not when suggesting a workplace one.
63
When could you send a suitability report for a personal pension payment suspension? If at all.
14 days
64
Cancellation policy for the following are?
EIS
ISA
Critical Illness
14 days
14 days
30 days
65
What changes have come in with tthe Consumer Compsite Investment Regulations?
Must given a summary of investment in durable medium
Distrubutor can make their own summary
IFA must make sure client understands
Adviser can feedback to distrubutor
66
What does the Finance Bill Set out?
Uk law regarding KIID and KID
Extension of UCITS
FCA set past performance
67
How long should info be kept for Pure Protection Policies?
6 years: This is term insurance and income insurance
68
What are the 2 forms of guidance?
Product and Generic
69
What are the 5 core functions of the UK Strategy for Financial well being?
Strategy, Debt advice, money guidance, pension guidance, Consumer protection
70
Why is the consumer duty neccessary to protect retial customers?
Asymmetry
Lack of Knowledge
Cognitive Bias
71
What is principle 12 and conduct rule 6?
Good outcomes for customers
71
What rules govern the prices you can set as an IFA?
Fair price
Same amount for the same product
What you do
Percentage and amount
Facilitation still allowed
72
What differences are there regarding stake holder advice?
No KYC: Decision tree instead
Now most suitable, just suitable
Meddium and long-term investments only 1.5% (1% over 10 years)
73
When is a report not required?
Not in the UK
Regulated Investment Scheme
Increase Premium
74
What would constitute a MIFID and non-mifid firm being a “per se” professional client?
Any 2: Over 40m in turnover, 2m in cash, 20 m on balance sheet
75
What is the criteria for an elective professional client?
1: SIg transactions 10 per quarter
2: Portfolio bigger than 500k
3: Worked in the financail sector
State they want to be professonial
75
What are the fiduciary Resposnibilities:
Fair treatment
Relationship to providers
Conflict of interest
exclusion of liability
Clear, fair and not misleading
Honest independence
Comminson and inducements
Charging for complaints
76
When is a client aggreement needed and not needed?
Retail: Before business or after phone call
Professional: reasonable time
Financial Promotion: None
Life offices selling life or pension policies: None
77
What are the limits for db pesnion transfer outs?
Transfering out more than 30k you need IFA oversight.
78
Ro1
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