You will need to know the main asset types are (e.g. shares, property, fixed interest, alternatives), as well as geared investments, ethical investments, index funds, hedged / un-hedged funds, and managed investments. It is also critical in this subject that you understand how a bond (fixed interest) works, particularly the relationship between price and yield.
Finally, you will generally have to pull all of this together in an advice document (SoA) where you are required to provide investment advice, based on a given risk profile, usually to a fictitious client with very specific needs and concerns.
Client Engagement Skills / Consumer Behaviour / Investor Decision Making
Again, regardless of the tertiary institution offering this subject, it typically contains a number of common elements. And once again, it gets quite academic and theoretical in its approach.
This subject introduces a number of theoretical concepts including decision making theory. It usually starts with Expected Utility – a linear concept which assumes 100% decision maker rationality; and progresses to the more modern decision making theory of Prospect Theory which focuses on the non-linear concept of value, and takes into account that decision makers aren’t always rational and importantly that the value is not a ‘final’ value as it is in Expected Utility Theory, but a change in financial position, the value of which is in the eye of the beholder and very much dependent on the decision maker’s wealth / poverty start point.
This subsequently introduces a range of real world heuristics (e.g. trial & error, rule of thumb, educated guess), biases and decision errors made by fund managers, financial advisers and clients alike, in a financial services context. This is the province of Behavioural Finance where is necessary to understand a wide range of different biases. Of course these nuances of human behaviour have knock-on effects in investor risk profiling and portfolio construction.
This subject typically addresses Emotional Intelligence (e.g. self-awareness, self-regulation, social skills, empathy, motivation) and Critical Thinking (inquisitive, well-informed, open-minded, strong reasoning, prudent judgment). The combination of these factors can directly influence client engagement, content of financial advice and how it is delivered.
Also relevant to this subject is the communication styles of both adviser and client. With a range of communication and feedback styles (e.g. assertive, aggressive, passive, passive aggressive, manipulative) it is no surprise that misunderstandings and communication gaps exist.
Finally, there is often an assignment where these concepts are pulled together. Typically, it is a communication plan or similar for a client based on a specific scenario.