Financial advice

• Financial advice


  Professional guidance on managing finances, including investments, retirement planning, taxes, and insurance, provided by a financial adviser based on an individual's unique financial situation and goals

  
• Financial advice


  • Tailored to individuals based on their unique financial needs and circumstances
  • Typically involves a comprehensive assessment of the individual's financial situation through a face-to-face interview or other means of communication
  • The financial adviser collects information to understand the individual's goals, risk tolerance, income, expenses, assets, and liabilities
  • Recommendations provided by the adviser are based on this gathered information and are aimed at addressing the specific financial needs identified
  • Advisers must ensure that the recommended products are suitable for the individual's financial situation and objectives
  • Can encompass various aspects such as investment planning, retirement planning, tax planning, insurance needs, and estate planning
  • The adviser may suggest a range of financial products and services, including but not limited to, stocks, bonds, mutual funds, retirement accounts, insurance policies, and annuities
  • It's essential for individuals to understand the fees associated with the recommended products and any conflicts of interest the adviser may have
  • Receiving ongoing financial advice can help individuals adapt their financial plans to changes in their life circumstances, economic conditions, and regulatory environment
  • While face-to-face meetings are common, technological advancements have made it possible for individuals to receive financial advice through virtual meetings, phone calls, or online platforms

  
• Areas of financial advice

  • Budgeting
  • Borrowing
  • Protection
  • Investment and Saving
  • Later-Life Planning
  • Estate Planning
  • Tax Planning
  • Offshore Considerations
• Process of giving financial advice

  1. Establishing Client-Planner Relationship

  2. Gathering Client Data and Identifying Goals

  3. Analyzing and Evaluating Financial Status

  4. Developing and Presenting Recommendations

  5. Implementing Recommendations

  6. Monitoring Recommendations
• Legal persons


  • Individuals
  • Attorneys and Deputies
  • Personal Representatives
  • Trusts
  • Companies
  • Partnerships
  • Agency
• Individuals


  • Adults of sound mind can enter contracts
  • Minors (under 18) can enter contracts, but they're voidable until ratified at 18
• Attorneys and Deputies


  • Power of Attorney (POA) allows someone to act on another's behalf
  • Ordinary POA is for specific actions; Lasting POA persists even if the grantor loses capacity
• Personal Representatives


  • Executors (named in a will) or administrators (if no will) manage deceased individuals' estates
  • They obtain legal authority via a grant of probate or letters of administration
• Trusts


  • Settlors transfer property to trustees for beneficiaries
  • Trusts are governed by trust deeds, with trustees having legal authority
• Companies


  • Separate legal entities from shareholders
  • Directors run the company and enter contracts on its behalf
• Partnerships


  • Formed by individuals for profit
  • Types include conventional, limited, and limited liability partnerships (LLPs)
• Agency


  • Agents act on behalf of principals in contracts
  • The scope of an agent's authority is crucial; exceeding it can render contracts voidable
• Conventional Partnership is not a separate legal entity from its members
• Executors


  Manage deceased individuals' estates
• Obtaining legal authority


  Grant of probate or letters of administration
• Trusts


  Settlors transfer property to trustees for beneficiaries
• Trust deeds


  Govern trusts, with trustees having legal authority
• Companies


  Separate legal entities from shareholders
• Directors


  Run the company and enter contracts on its behalf
• Partnerships


  Formed by individuals for profit
• Types of partnerships


  • Conventional
  • Limited
  • Limited liability partnerships (LLPs)
• Conventional partnership


  Not a separate legal entity, partners have unlimited liability for debts, each partner can sue and be sued individually, unable to hold land or property in the partnership's name
• Limited partnership


  Includes general partners with unlimited liability and limited partners with liability restricted to their investment, general partners manage the business, limited partners provide capital, general partners can be sued personally, limited partners have liability limited to their investment
• Limited Liability Partnership (LLP)


  Separate legal entity from its members (partners), partners' liability is limited to their investment, can hold land and property in its own name, requires designated partners who carry out administrative duties similar to company officers
• Client Relationship Nature


  Varies based on the service provided, ranging from transaction execution to long-term wealth management, advisers have a fiduciary duty to observe high standards of personal conduct and respect the client's confidence and trust
• Adviser Responsibilities


  • Help clients prioritize objectives and document investment objectives and risk tolerance
  • Determine and agree on an appropriate investment strategy in the client's best interest
  • Keep products under review and carry out necessary administration
• Communication Techniques


  • Establish rapport with the client
  • Clarify the purpose of meetings
  • Explain the importance of information collection
  • Use a mix of open-ended and closed-ended questions
  • Explain jargon when necessary
  • Check understanding and establish priorities
  • Guide and control the pace of the interview
  • Listen actively to what the client wants
• Matching Solutions with Needs

  Gathering detailed information about the client is essential for providing appropriate advice, information includes personal details, financial details, objectives, risk tolerance, liquidity, time horizons, tax status, and investment preferences, advisers undertake a detailed interview to understand the client's assets, liabilities, and needs before identifying potential solutions, recommendations must be suitable and appropriate, considering the client's knowledge, experience, and financial capacity for investment risks
• Key elements related to attitude to risk

  • Risk Tolerance
  • Attitude to Risk
  • Capacity for Loss
• Risk Assessment


  Risk Tolerance reflects a client's willingness to endure fluctuations in investment value without feeling compelled to sell immediately, Attitude to Risk represents the client's personal opinion on the risks associated with investments, based on their knowledge and experiences, Capacity for Loss is the client's ability to absorb financial losses resulting from investments
• Impact on Financial Planning

  A client's risk profile significantly influences the recommended financial planning strategy, especially concerning financial protection and investment product selection, objective factors like wealth, income, and age, as well as subjective factors such as psychological makeup and comfort with risk, play a role in determining risk tolerance
• Objective Factors


  • Life-cycle
  • Age
• Subjective Factors


  • Financial Knowledge
  • Risk Comfort
  • Preferred Investment Choice
  • Approach to Bad Decisions
• Challenges in Risk Assessment


  Understanding a client's risk attitude requires skill and experience due to the subjective nature of risk perception, defining risk profiles (e.g., cautious, balanced, adventurous) has limitations in client understanding and agreement, financial services companies employ various assessment methods, but the key is for advisers to comprehend the client's attitude to risk and asset characteristics for suitable matching of solutions
• Assessing Suitability


  Before offering investment advisory services or discretionary portfolio management, firms must determine whether these services are suitable for professional or retail clients, gathering information about the client's knowledge, experience, and financial situation is crucial to ensure suitability, firms must take reasonable steps to ensure that any recommendations made align with the client's disclosed facts and other relevant information
• Providing Information to Clients

  Financial advisers have a duty to disclose material information about their firm and proposed investments to clients, material information includes details on charges, cancellation rights, penalties, risk warnings, and special terms related to recommended investments, ongoing service arrangements and asset safeguarding measures should also be clearly communicated to clients
• Consumer Rights


  Clients have rights defined by the contract between them and the financial institution, as well as regulations on unfair contract terms and consumer credit, clients may have a cooling-off period during which they can decide whether to proceed with their purchase, especially for certain investment or insurance products, firms must provide clear written notice of the right to cancel, including duration, conditions, and practical details, if applicable
• Monitoring and Reviewing Client Circumstances

  Financial planning is an ongoing process due to the possibility of changes in the client's environment, employment status, market performance, or personal circumstances, clients should regularly review their plans to ensure progress towards objectives and make adjustments as needed, firms providing investment advice should agree with clients on periodic assessments of the continued suitability of investments, with at least annual reviews and increased frequency for certain risk profiles, where applicable, firms must provide clients with periodic suitability reports containing updated statements on how investments align with preferences, objectives, and characteristics