R01/8: Understand the range of skills required when advising clients

What must communications with clients under the Consumer Duty achieve?

They must equip clients to make effective, timely, and properly informed decisions about financial products and services.

What key information should firms provide to clients regarding their services?

Details about the service offered, including the basis on which the firm provides financial advice (e.g., independent or restricted), and information about the cost of the service.

What is the purpose of the European Standardised Information Sheet (ESIS) in mortgages?

It provides a standard summary of the most important features and costs of a mortgage for easy comparison of products.

What information should clients receive after a financial adviser recommends a product?

Written information about the product that helps them decide whether to proceed with the recommendation.

What are some key elements included in the key information document for investments?

The aim of the investment, the client's commitment, how payments are invested, main risks, tax position, and fees and charges.

What is the purpose of fact-finding in financial advising?

To gather relevant information to determine a client's demands, needs, and objectives to recommend suitable products.

What is required of financial advisers regarding fact-find information?

They must keep it on file when giving advice and ensure it remains correct, updating it if facts change.

What should be recorded if a client is not prepared to give information during a fact-find?

A comment should be recorded on the fact-find to demonstrate that all areas have been addressed.

What types of information does a typical fact-find seek to determine?

A client's attitudes and opinions about their financial situation and their future hopes and aspirations.

What should clients do with the information they receive about recommended products?

They should take time to read the documents and ensure the product is suitable for them before making a commitment.

What information can clients expect from general insurance policies?

Coverage details, exclusions, limits or restrictions, and other important features before making a decision.

Why is it important for clients to understand the costs associated with financial services?

It helps them assess if the service is right for them and allows them to shop around for the best deal.

What is the significance of providing information at the right time and in an understandable way?

It ensures that clients can make informed decisions about financial products and services.

What should clients do with the information they receive about a financial service?

They should read it carefully and ask questions about anything they don't understand.

What is the role of the FCA regarding fact-finding?

The FCA requires financial advisers to maintain accurate fact-find information and document any changes.

What is a common feature of fact-finds across different adviser firms?

While the purpose is the same, the appearance and structure can differ markedly between firms and types of businesses.

What is the importance of the fact-find in the context of ongoing client advice?

It must remain accurate and updated to reflect any changes in the client's circumstances.

What should clients be encouraged to do with the information about a recommended product?

They should shop around to find the right deal for them.

What does the information provided by firms help clients to do?

Understand the service being offered and the associated costs.

What does the fact-find process typically include beyond hard facts?

It seeks to determine the client's attitudes and opinions about their financial situation.

What is an example of a document that summarizes mortgage features for clients?

The European Standardised Information Sheet (ESIS).

What should clients do if they have questions about the information provided by firms?

They should ask questions to clarify any uncertainties.

What is the purpose of the initial part of a fact-find in financial advising?

To gather general information about the client, including name, address, relationship status, and health, which helps assess financial demands and needs.

Why is a client's relationship status important in financial advising?

It helps assess potential financial demands during extended illness or death and informs the client's tax position.

What key factors are determined by a client's country of domicile and residence?

They are crucial for determining liability to UK taxes.

Why are questions about a client's health and smoking status included in fact-finds?

To obtain accurate information for life insurance quotes and assess eligibility for policies.

What does Part 2 of a fact-find focus on?

It focuses on family details, providing insight into the client's financial dependants for whom benefits may be needed.

How can the names of a client's dependants be used from a marketing perspective?

They may form the basis of a list of referrals from the client, subject to data protection rules.

What information is gathered in Part 3 of a fact-find?

Details about current and previous employment, salary, and employer benefits, which are crucial for assessing the client's financial situation.

Why is it important to know about a client's employer benefits?

It helps identify the extent of life, sickness, and medical cover, allowing for a quantification of any shortfall in coverage.

What does Part 4 of a fact-find address?

It addresses other professional advisers the client uses, which may need to be consulted regarding financial recommendations.

Why should financial advisers collaborate with other professionals?

Collaboration leads to a higher standard of advice for the client, rather than viewing other professionals as threats.

What is the focus of Part 5 in a fact-find?

It focuses on income and expenditure to determine if the client is spending more than their income.

What does a surplus or deficit in income indicate?

It indicates the client's ability to save or invest money regularly.

What should advisers avoid assuming about clients who spend all their income?

They should avoid assuming these clients cannot afford premiums for financial protection or make savings.

What does Part 6 of a fact-find require from the client?

It requires the client to list used and invested assets.

What are considered used assets in a financial context?

Used assets include the client's house and personal belongings that cannot easily be used for investment or to subsidize lost earnings.

What might details of a client's invested assets indicate to the adviser?

They may indicate the client's financial stability and potential for investment growth.

What is the significance of accurately recording a client's financial position?

It ensures that the adviser has a true understanding of the client's circumstances for better advice.

What is the role of the adviser in the fact-finding process?

To gather comprehensive information to assess the client's financial situation and needs.

What is the importance of understanding a client's financial dependants?

It helps the adviser recommend appropriate death and sickness benefits.

How can a client's health status affect their financial advising?

It influences eligibility for life insurance and potential annuity options.

What is the impact of a client's spending habits on financial advising?

It affects their ability to save or invest, which is crucial for planning financial protection.

Why is it essential to consult with other professionals when advising clients?

To ensure that all aspects of the client's financial situation are considered and to provide comprehensive advice.

What is the overall goal of the fact-finding process in financial advising?

To create a complete picture of the client's financial situation to tailor suitable advice and solutions.

What can details of a client's invested assets indicate to an adviser?

They can indicate the client's attitude to risk, such as whether they are adventurous (heavy investment in equities) or cautious (reliance on bank accounts).

What aspects of a client's financial requirements can be revealed through their invested assets?

They can reveal short-term or long-term demands and needs, and whether the client prefers an active or passive investment strategy.

What is the focus of Part 7: Liabilities in a client's financial assessment?

It emphasizes ensuring that a client's liabilities can be met if they die or if their earnings cease due to illness or accident.

What should an adviser confirm regarding a client's mortgage repayment method?

The adviser should confirm whether the mortgage repayment method is suitable for the client's circumstances or if it should be restructured.

What should be prioritized when managing a client's liabilities?

Priority should be given to the repayment of short-term, high-cost credit.

How can an adviser help reduce a client's outgoings related to loans?

By identifying loans that could be refinanced to reduce outgoings or the interest rate on debts.

What caution should be taken when switching debt repayment methods?

Care must be taken regarding the penalties of switching methods and the cumulative effects of consolidating debt.

How is a client's net worth calculated?

Net worth is calculated by deducting total liabilities from the total value of assets.

What types of life insurance might a client have?

A client may have death-in-service cover, mortgage protection insurance, and/or a level term family income policy.

When should a client be advised to surrender an existing insurance contract?

Only in extreme circumstances where the policy is entirely inappropriate for their needs.

What information about health insurance should be gathered from a client?

Details about sick pay from the employer, including how much is payable and for how long.

What should an adviser consider if a client already saves regularly?

The adviser may need to recommend savings plans based on the client's objectives, such as future school or university fees.

Why are pension details important in a client's financial assessment?

They help identify whether the client can expect a reasonable standard of income in retirement.

What should an adviser do if a client shows perceived indifference towards their pension?

The adviser should emphasize any shortfalls and stress the importance of adequate retirement provision.

What should be checked regarding a client's will?

Whether the will is valid and if its provisions meet the client's current needs.

What information can a history of lifetime gifting provide for older, wealthier clients?

It gives a truer picture of the estate's value and indicates potential needs for IHT liability mitigation.

What may anticipated inheritances indicate for a client?

They may indicate a need for future financial planning.

What is the significance of risk profiling in a client's financial assessment?

It allows the adviser's recording of the client's attitude to risk alongside their capacity for loss.

What is the purpose of risk profiling in financial planning?

To record the client's attitude to risk alongside their capacity for loss.

What should the fact-find process include to formulate a comprehensive recommendation?

Key information that considers all relevant circumstances, often prompting deeper client reflection on their demands, needs, and aspirations.

What basic details are gathered during the fact-find process?

Tax liabilities, country of domicile and residence, relationship status, and health.

Why are family details important in the fact-find process?

To identify financial dependants who may receive benefits in the event of death or illness.

What employment details are essential to ascertain during the fact-find?

Level and security of income, extent of cover provided by employer and the State, and identification of any shortfall.

What role do other professional advisers play in the financial planning process?

Clients may wish to consult other professionals, such as stockbrokers, depending on the proposed course of action.

How does income and expenditure information contribute to financial planning?

It indicates the client's ability to save regularly and identifies any surplus or deficit.

What is the formula for calculating net worth?

Net worth = Assets - Liabilities.

What types of insurance are assessed to determine financial protection needs?

Life insurance and health insurance.

What is the significance of regular savings in financial planning?

It identifies the purpose of savings and whether they need to be established to achieve future goals.

What aspects of pensions are assessed during the fact-find?

Current provisions and areas of shortfall.

Why is it important to identify inheritances during the fact-find?

To determine if a valid will is in place, whether inheritances are anticipated, and the need for inheritance tax (IHT) planning.

What does the attitude to risk encompass in financial planning?

The level of risk the client is prepared to take, their capacity for loss, and any ESG (Environmental, Social, and Governance) concerns.

What are the five key demands and needs of clients related to life stages?

Protection, income protection, pensions, savings, and investment.

What does protection in financial planning refer to?

Capital protection to provide for dependants in the event of death or serious illness and to repay outstanding loans.

What is the purpose of income protection in financial planning?

To provide income in the event of accident or ill health.

What does the pensions demand cover in financial planning?

Provision for income or capital during retirement or when paid employment ceases.

How do savings contribute to financial planning?

They produce capital through regular investment of surplus income for various life stages.

What is the investment demand in financial planning?

The investment of lump sums to protect from inflation and increase value, typically later in life.

What mnemonic can be used to remember the key demands and needs in financial planning?

PIPSI (Protection, Income protection, Pensions, Savings, Investment).

What types of questions might an adviser ask during the fact-finding process?

Questions about expected inheritances, future expenditure needs, satisfaction with current investments, risk levels for financial objectives, and motivations for life and sickness cover.

What is the role of a financial adviser in relation to a client's demands and needs?

To establish what the client's actual demands and needs are in a methodical manner.

What process should be followed to address a client's financial needs?

Each need should be identified, discussed, quantified, and prioritised.

What factors highlight potential demands and needs during the fact-finding process?

Income and expenditure, assets and liabilities, and a commitment to dependants.

How can a financial adviser quantify a client's potential needs?

By looking at possible income and capital shortfalls on death and costing out the client's objectives and aspirations.

What types of questions can help define a client's important demands and needs?

Questions about the financial impact of long-term illness, birth or death in the family, redundancy, and managing expenditures.

What is the purpose of discussing demands and needs with a client?

To help the client either reject the perceived need or accept that there is a potential weakness in their financial planning.

What questions should be asked to quantify a client's demands and needs?

Questions about income reduction due to illness, income levels at retirement, and capital needed for future purchases.

What should be included in the prioritisation of a client's demands and needs?

A list of potential demands and needs, a priority order recognized by the financial services industry, and a refined list discussed with the client.

What is one of the challenges in prioritising a client's financial demands and needs?

Taking potentially conflicting information and creating a priority list that should be met.

What should be recorded if a client chooses not to acknowledge a financial need?

It should be recorded as part of the advice process to protect the adviser from future claims.

Why might a financial adviser need to help a client prioritise their demands and needs?

Most clients will not have enough income or capital to pay for all recommendations.

What does PIPSI stand for in the context of financial advising?

Generally accepted priority order for addressing financial demands and needs.

What is the significance of discussing the quantifiable aspects of demands and needs with the client?

It helps the client understand the actual income or capital required for their financial goals.

How can the adviser ensure all potential demands and needs are considered?

By discussing them together with the client and providing reasons for their importance.

What is the outcome of the identification process in financial advising?

A list of potential demands and needs that may have been quantified using generally accepted assumptions.

What should the adviser do if a client does not wish to take action on a perceived need?

Record the client's decision as part of the advice process.