PRACTICE QUESTIONS TO TEST YOUR KNOWLEDGE AHEAD OF THE FASEA EXAM

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Question 1.

From the licensee’s point of view, which of the following is a mandated obligation in the provision of advice to a retail client, as opposed to a wholesale client?

  1. Only a retail client is required to be given a FSG, SoA, PDS
  2. Dispute resolution & compensation arrangements only apply to retail clients
  3. FOFA requirements concerning best interests obligations, ongoing fee disclosure and conflicted remuneration only apply to retail clients
  4. All of the above

Question 2.

An FSG is not required to be given to a client in certain circumstances, including where the client is not a retail client.  TRUE or FALSE 

Question 3. 

In its example Statement of Advice, ASIC points out that an SOA serves which of the following purposes?

  1. A compliance tool
  2. A mechanism to protect the providing entity against liability
  3. A complete record of all information that you would expect to find in the client file (i.e. the information kept about the advice provided to the client); or
  4. A communication tool that sets out and explains the advice
  5. A place to include additional information not required by law
  6. All of the above

Question 4.

A Statement of Advice can be combined into a single document with a Financial Services Guide TRUE or FALSE 

Question 5.

Ryan is an authorised representative and advice provider who recommends a replacement life insurance policy (product switch).  In determining whether his client is likely to be in a better position by following his advice, Ryan must take into account all of the circumstances, including the overall cost savings of the product replacement (i.e. making the switch).   In determining overall cost savings to the client, Ryan must include his fees if his fees are payable only if the switch is made.  However, his fees do not need to be included in the overall cost determination if his fees are payable regardless of whether the product switch is made or not.  TRUE or FALSE

Question 6.

  Which of the following statements is NOT true of scaled advice?

  1. The rules that apply to ‘scaled advice’ and ‘comprehensive advice’ are identical
  2. Scaled advice can include advice on a single topic or advice on multiple topics
  3. Scaled advice can be simpler and of lower quality where the subject matter is not complex
  4. When giving scaled advice, it should be very clear in your SOA what advice you have provided and what advice you have not provided

Question 7.

Authorised Representative and Advice provider Sarah recommends that that her client withdraws money from bank account savings and invest it in managed funds.  Sarah considers this to be an investment into a new product rather than a replacement product (i.e. product switch) and does not provide further disclosure (as required by s947D) in her Statement of Advice (SoA).  Sarah’s SoA is not defective.  TRUE or FALSE

Question 8.

In regard to the Financial Planners and Advisers Code of Ethics 2019, even if an adviser follows the steps set out in s961B of the Corporations Act (i.e. the safe harbour steps), that adviser may still not have complied with the duty under the Code (i.e. the Financial Planners and Advisers Code of Ethics 2019) to act in the client’s best interests.  TRUE or FALSE  

Question 9.

Which of the following is one of the main factors in determining whether or not you have provided personal advice rather than general advice?

  1. You provided a current FSG to the client
  2. You considered at least one aspect of the client’s relevant circumstances
  3. You asked general questions at the fact find interview
  4. You were in possession of at least two aspects of the client’s relevant circumstances

Question 10.

Standard 3 of the Financial Planners and Advisers Code of Ethics 2019 requires that you must not advise, refer or act in any other manner where you have a conflict of interest or duty.

Homer is an authorised representative and advice provider employed by a bank.  He recommends the bank’s own brand of risk insurance products to his client.  As part of Homer’s employment contract, he earns bonuses which are directly related to the volume of risk business he writes.  Homer has breached Standard 3?  TRUE or FALSE

Question 11.

In relation to general advice in advertisements, which of the following statements is true?  Financial product advertisements must:

  1. Not identify the issuer of the product
  2. Refer potential buyers to a contact telephone number.
  3. Provided that the advertisement also states that the client should consider whether the financial product is appropriate for them, the advertisement does not need to contain the s949A warning
  4. Contain the s949A warning regardless

 Question 12.

There are two categories of advice. They are. ‘scaled advice’ and ‘comprehensive advice’, and there are different best interests duty requirements for each.  TRUE or FALSE 

Question 13.

Which of the following does NOT make a Statement of Advice defective?

  1. There is a misleading or deceptive statement in the SoA
  2. There is an omission of one or more of the main SoA requirements required by section s947B, s947C
  3. There is a failure to provide the additional SoA information required by s947D where advice recommends replacement of one product with another
  4. Information has been incorporated by reference into the SoA and the document containing the information has already been given to the client and the SOA states that a copy of the information may be obtained from the providing entity on request, at no charge

Question 14.

Read the following scenario and answer the questions below.

Scenario

A client couple approaching retirement meets with an advice provider to seek advice on what to do with their superannuation when they retire.

The clients have healthy superannuation balances because they have been contributing to their superannuation for the past 35 years. They have no experience with investing.

The clients’ existing superannuation fund has no pension option. The clients understand that they need to start making some decisions about their superannuation but, because they have no previous investment experience, they are nervous about this process.

They want a simple, cost-effective solution that they can easily understand and does not require too much of their time.  They have been told that SMSFs are an easy way to maximise the value of their superannuation but they are unsure.

They are looking forward to retirement and do not want the burden of watching the market every day, as they have seen some of their colleagues do.

The advice provider recommends an SMSF and reassures the client that they do not need to be too involved because the advice provider will look after it for them.

Questions

  1. Has the adviser acted in the best interests of the client? (provide at least one Corporations Act reference to support your answer)
  2. Which of the seven (7) elements of the safe harbour has the adviser failed to satisfy?
  3. In regard to the Financial Planners and Advisers Code of Ethics 2019, in what way has the adviser failed to demonstrate realise or promote the values of ‘trustworthiness’ and ‘fairness’?
  4. How has the adviser breached Standard 2 of the Financial Planners and Advisers Code of Ethics 2019?
  5. How has the adviser breached Standard 5 of the Financial Planners and Advisers Code of Ethics 2019?
  6. How has the adviser breached Standard 7 of the Financial Planners and Advisers Code of Ethics 2019?
  7. How has the adviser breached Standard 9 of the Financial Planners and Advisers Code of Ethics 2019?

Question 15.

Read the following scenario and answer the questions below.

Scenario

Mary arranges a first appointment with you for retirement advice. She and her husband Bob are both 68.  Mary is in good health but Bob has been diagnosed with dementia.  They both worked as high school teachers before Bob was forced to retire 3 years ago due to his condition and Mary retired a year ago to look after him.  Between them, they have close to $1 million in accumulated super.

Your advice addressed the following areas:

  • Commence superannuation income streams from their respective accounts
  • Re balance their superannuation investment (your only consideration was to match their asset allocation to their respective risk profiles)
  • Nominate / Reversionary beneficiaries, Wills and Enduring Powers of Attorney
  • Eliminate the relatively small amount of debt they had
  • Their eligibility or otherwise for the Age Pension and carer’s allowance
  • Their primary short term goal to travel overseas while Bob is still able
  • Their primary short term goal to visit family interstate while Bob is still able
  • Their longer term goal to leave an inheritance to their two adult children

You didn’t pay much attention to scoping the extent of your retirement advice in your SoA, but at the time your clients were happy with the advice you provided and they paid your fees immediately.  Three months later, still worried about Bob worsening condition, Mary seeks a second opinion from another adviser.  She is told that not only is your advice incomplete, it is in breach of the Code of Ethics

Questions

1. Which standard of the Financial Planners and Advisers Code of Ethics 2019 have you primarily breached?

2. When you identify the correct standard, then go to the Explanatory Statement and identify at least two (2) additional issues that you should have considered in your advice?

3. Did you satisfy every element of the s961B safe harbour?  If not, why not?

Question 16

Read the following scenario and answer the questions below.

Scenario

You are referred to a new client, Jane by a long time loyal client and advocate, Betty.  You duly identify the subject matter and accurately scope your advice; and satisfy every other element of the s961B safe harbour.  Jane is happy with your advice, implements it and, in no time, improves her financial well-being.  So far you have acted in Jane’s best interest according to the Corporations Act, and you have satisfied the Code of Ethics best interests test in Standard 2, paragraph 29. (i.e. the test is, in short: will your advice and recommendations improve the client’s financial well-being?)

Betty and Jane are close friends and discuss your advice and your service between them.  Your long time client and advocate, Betty becomes envious of the time you are spending with Jane, and of the increase in Jane’s wealth as a result of your advice.

To your astonishment Betty makes a complaint.

Then you recall that Standard 2 paragraph 34 states that “This Code does not have any equivalent provisions. So, even if you follow the steps set out in section 961B of the Act, you may still not have complied with the duty under the Code to act in the client’s best interests.”

Question

1. As strange as this might sound, you may have breached the Code of Ethics.  If so, which Standard would you most likely have breached in this circumstance, and why?

Question 17.

In RG175.(252 – 257), ASIC sets out a number of processes for complying with the best interests duty.  In regard to those processes, which of the following statements is NOT true?

1. The scope of the advice includes all the issues that must be considered for the advice to meet the client’s objectives, financial situation and needs (including the client’s tolerance for risk)

2. If the scope of the advice changes, the change is consistent with the client’s objectives, financial situation and needs

3. The advice provider should focus on providing advice that is not product specific, or on a combination of advice that is both product specific and non-product specific, where this would better suit the client’s objectives, financial situation and needs.

4.  Processes for complying with the best interests duty can still be effective even if an advice model typically leads to a one-size-fits-all outcome

Question 18

On 31 March 2019, Maria retires from full time employment at age 64.  On 1 June 2019, Maria inherits $180,000 tax-free from the distribution of her late Mother’s estate.  On 1 July 2019, Maria turns 65 and on the following day she decides to make an online non-concessional (after tax) contribution into her superannuation fund via BPay.  From 31 March 2019 to 2 July 2019, Maria remains permanently retired and not gainfully employed; she is doing unpaid charity work only.  She signs a work declaration to that effect.

Before she completes the online contribution, she phones you to ask how much of the $180,000 she can contribute.  What is your advice?

  1. $180,000
  2. $100,000
  3. $25,000
  4. $0

Question 19

Which of the following is NOT considered to be a financial product as defined in RG121?

  • shares
  • debentures
  • interests in a managed investment scheme
  • derivatives
  • general insurance
  • life insurance
  • superannuation
  • basic deposit products
  • private trust
  • retirement savings accounts
  • margin lending facilities

Question 20

Which of the following is NOT considered to be a financial service?

  • provide financial product advice
  • Factual information where no opinion or recommendation is expressed
  • deal in a financial product
  • make a market for a financial product
  • operate a registered managed investment scheme
  • provide a custodial or depository service; or
  • provide traditional trustee company services.

Question 21

Tom is a financial adviser.  In order to sell an investment financial product to a prospective client, Tom promises that the investment will make a minimum return of 17% per annum and provides the client a baseless forecast document to back up his claim.  He conceals the true performance history of the investment.

Which of the following is the correct term for this type of behaviour?

  1. Inducement to deal
  2. Bait and switch
  3. Market rigging
  4. Pyramid selling

Question 22

Fred is a risk insurance adviser.  He persuades a client named Andrew to purchase a life insurance policy on the promise that he will refund $500 commission if Andrew refers Fred 3 new clients to Fred, all of whom sign up to in-force life insurance policies with Fred.

Is this practice legal?

  1. Yes
  2. No

Question 23

Tony arranges risk insurance protection for his clients Mary and Doug.  He then refers them to mortgage broker, Ray who will arrange a mortgage for the home they wish to purchase.  For each successful referral that results in a home loan, Ray pays Tony $200.

This practice is legal under:

  • Australian Competition and Consumer laws TRUE or FALSE?
  • Corporations Act 2001 TRUE or FALSE?
  • Financial Planners and Advisers Code of Ethics 2019 TRUE or FALSE?

Question 24

Mortgage broker Ray arranges a home mortgage for Mary and Doug at a $500 discount on the strict condition that they purchase their mortgage insurance from Acme Mortgage Insurers.  Acme pays Ray $1,000 commission when Mary and Doug purchase mortgage insurance.

Is this practice legal?  Yes or No

What is this practice called?  _________________________________

Question 25

To be a tax (financial) advice service:

  1. The service must be provided by a financial services licensee or a representative of a financial services licensee
  2. The service must relate to ascertaining or advising about liabilities, obligations or entitlements that arise or could arise under a taxation law
  3. The service must be provided in the course of giving advice of a kind usually given by a financial services licensee or a representative of a financial services licensee
  4. The entity or person receiving the service can reasonably be expected to rely on the service for tax purposes
  5. All of the above

 

Question 26

Which of the following mechanisms may NOT be used by tax (financial) advisers to manage conflicts of interest:

  1. disclosing conflicts of interest
  2. controlling conflicts of interest
  3. Ignoring the conflict
  4. avoiding conflicts of interest

Question 27

Len engages Barry, a tax (financial) adviser, to provide advice on the tax implications of an inheritance Len is entitled to receive.  Barry does not have the expertise to advise on the tax implications of receiving an inheritance.

Barry decides to proceed with the engagement and provide advice on the tax implications of the inheritance based on his limited and inadequate knowledge of the relevant taxation laws.

Which TPB Code Item has Barry breached?  _______________________________________

State two actions Barry could have taken to ensure that Len receives competent advice and to avoid breaching the TPB Code of professional Conduct.

  1. _____________________________________________________________
  2. _____________________________________________________________

Question 28

Determine whether the following comparisons are true or false

The primary distinction between the obligation under Code Item 5 and the best interests duty/conflicts priority rule is that Code Item 5 requires that the tax (financial) adviser has arrangements in place for managing actual or potential conflicts of interest that may arise.

In comparison, the best interests duty/conflicts priority rule under the Corporations Act is more narrowly focused on how to deal with an actual conflict of interest.

TRUE or FALSE

The best interests duty/conflicts priority rule under the Corporations Act merely requires that the client’s interests be prioritised in the event of an actual conflict.

In comparison, Code Item 5 is broader and requires that arrangements must be in place to avoid, control and/or disclose actual or potential conflicts of interest in relation to the activities that a tax (financial) adviser undertakes in their capacity as a tax (financial) adviser

TRUE or FALSE

A distinction between the obligation under Code Item 5 and the best interests duty/conflicts priority rule is that Code Item 5 applies broadly to the personal and professional conduct of all registered tax practitioners, in relation to the activities that a practitioner undertakes in their capacity as a tax practitioner.

In comparison, the best interests duty/conflicts priority rule under the Corporations Act only applies to those providing personal advice to retail clients.

TRUE or FALSE

Question 29

Karen is seeking advice on improving the performance of her superannuation fund. Her adviser is Margaret, an authorised representative of Super Duper Financial Planning Pty Ltd.

Margaret advises Karen to roll over her superannuation benefits from her current industry fund to a new retail fund.  Margaret and her licensee (Super Duper Financial Planning Pty Ltd) will receive a benefit from the retail fund provider when the rollover is implemented.

In preparing her advice, Margaret does not attempt to compare the investment asset allocation or likely returns in her existing industry fund with those in the recommended retail fund.  Also, she does not address the increased ongoing fees that Karen will have to pay in the replacement retail fund.

Which values has Margaret failed to demonstrate, realise or promote? ____________________________

Margaret has breached Standard 2.  State two (2) reasons why:

  1. __________________________________________________________
  2. __________________________________________________________

State two (2) other standards that have been breached with one (1) reason why

Standard ?  ____________________________________________________________________

Standard ?  ____________________________________________________________________

Question 30

Is the following comparison true or false?

A distinction between the Corporations Act and Standard 2 Financial Planners and Advisers Code of Ethics 2019, is that the Act requires a s961H Warning advice be provided to a retail client in the event of personal advice that is based on incomplete or inaccurate information.

In contrast, Standard 2 requires that to comply with the ethical duty, it will not be enough to limit inquiries to the information provided by the client; you will need to inquire more widely into the client’s circumstances.  You are not relieved of the ethical duty merely because the client does not provide enough information, even when asked.

TRUE or FALSE

Question 31

A distinction between the best interests obligations set out in the Corporations Act and Standard 2 of the Financial Planners and Advisers Code of Ethics 2019 is that, according to Para 34, Standard 2 … even if you follow the steps set out in section 961B of the Corporations Act, you may still not have complied with the duty under the Code of Ethics to act in the client’s best interests.

(REF: Financial Planners and Advisers Code of Ethics 2019 Explanatory Statement Para 34)

State two (2) additional actions restraints or behaviours that are expressly required by the Code of Ethics standards, which are not specifically mentioned in the Corporations Act.

  1. ___________________________________________________________________
  2. ___________________________________________________________________

Question 32

Standard 3 Financial Planners and Advisers Code of Ethics 2019 states that you must not advise refer or act in any other manner where you have a conflict of interest or duty.  Which two (2) of the following are NOT conflicts of interest?

  1. A fee or other benefit received directly from the client
  2. A fee received from a mortgage broker for referring clients
  3. You act for both parties in ongoing divorce proceedings with their written consent
  4. A commission received in relation to a risk insurance product
  5. A private hospitality benefit and gifts provided by an insurer valued at $1,000
  6. A discount on your monthly licensee fees in return for writing $500,000 of an in-house product each month

Question 33

What are the two (2) primary aims of the conflicted remuneration provisions?  That is, what do they achieve for the community?

  1. ____________________________________________________________
  2. ____________________________________________________________

Question 34

There are five factors that Goldberg identified as primary factors of personality.

  • Extroversion – is the ability to relate to others and enjoy their company. Extroverts like to have company and they feel comfortable in a group setting. They work well in teams and are optimistic and enthusiastic. When they are with other people they are like a fish in water.
  • Agreeableness – This is primarily related to a person’s capacity for empathy. Those who score high in this factor are understanding and tolerant with other people. They are very good at understanding the needs and feelings of others.
  • Conscientiousness – refers to the capacity for self-control and the ability to act effectively. It is related to planning, organizational, and execution skills. Conscientiousness is also related to persistence, the ability to follow through on goals and objectives, and punctuality.
  • Neuroticism – addresses the ability or inability to deal with difficult situations in life. People who score high in this factor tend to behave unpredictably. They don’t display consistent behaviour and their reactions vary widely, though it’s not clear why.
  • Openness to experience – People who are highly open to experience are imaginative and appreciate art. They cooperate well with other people. They are also curious and prefer variety to routine.

Are the following statements true or false?

In predicting who is the head of the household in regard to financial matters it is likely to be the spouse with the higher score on Conscientiousness trait and lower score on Agreeableness.

TRUE or FALSE

In part at least, a lack of money management skill is fueled by reduced conscientiousness and increased belief that material things can lead to happiness.

TRUE or FALSE

A lower score in the traits of conscientiousness is more likely to lead to an increased risk tolerance.

TRUE or FALSE

Having regard to Goldberg’s five personality traits and economic locus of control – extraversion, agreeableness, conscientiousness, emotional stability, intellect, internal locus of control, and external locus of control, people whose personality traits relate to intellect and internal locus of control tend to have higher level of financial literacy than those with other personality traits.

TRUE or FALSE

Openness, conscientiousness and agreeableness are positively related to financial culture whilst extraversion and neuroticism are negatively related to financial culture.

TRUE or FALSE

Question 35

Investment risk profiling is central to the work of financial planners. Determining the risk profile of a client is a high-stakes task, made all the more challenging in one-issue telephone-based financial consultations which lack an ongoing (or preceding) engagement between a particular planner and client.

What are two actions a financial planner can take to make risk profiling less challenging and more meaningful?

  1. ________________________________________________________
  2. ________________________________________________________

Question 36

Which of the following psychological errors are likely to derail financial behaviour?

  • Optimism
  • Confidence
  • Emotional judgement
  • Self-control

Question 37

Evidence shows that the moral principle or theory a person chooses to apply is often based on:

  • Emotions
  • Logic
  • The desire to not conform
  • The truth

Question 38

Research has found seven (7) primary characteristics of trust evident in personal financial planning that are essential to the client-adviser relationship.  Which of the following characteristics are they?

  • vulnerability and risk
  • feeling
  • honesty
  • faith
  • best interests
  • accountability
  • competence
  • All of the Above

Question 39

A study in India into how financial literacy and demographic variables relate to behavioural biases, which was NOT one of the results found?  Which of the following are among those findings?

  1. A negative association with the disposition effect and herding bias
  2. A positive relation with mental accounting bias
  3. No significant relation with overconfidence and emotional biases
  4. Age, occupation and investment experience are the most important demographic variables that relate to the behavioural biases of individual investors
  5. Males tend to be more overconfident than are females about their knowledge of the stock market
  6. Younger inexperienced investors are more likely to consult peers whereas older more experienced investors are not
  7. All of the above

Question 40

Philosophers have developed five (5) different approaches to values to deal with moral issues.  Which of the following is NOT one of these approaches?

a) The utilitarian approach

b) The free rider approach

c) The rights approach

d) The common good approach

Question 41

Research shows fairness to be one of the most fundamental ethical instincts in humans. TRUE or FALSE

Question 42

The question underpinning the Ethical choices test is “Are the people affected by this decision able to make their own free choices?”

Are the following related statements True or False?

  1. The Ethical Choices test reflects one of the fundamental ways of showing respect for the equality of other humans; that is respecting their freedom and ability to determine the course of their own lives by making choices based on what they think is valuable. TRUE or FALSE
  2. One of the weaknesses of the Ethical Choices test can reinforce a complex view of human decision making that people are clear about what they value and make rational choices based on those values. TRUE or FALSE
  3. Another of the weaknesses of the concept of freedom which underpins the Ethical Choices test is the subject of much disagreement TRUE or FALSE

Question 43

Easy Mark Financial Services Pty Ltd is a Corporate Authorised Representative of Licensee, Australia Wide Financial Pty Ltd.  Easy Mark FS was engaged by the director of New Zealand Company NZ Ethical Investments, to recommend and facilitate investments on behalf of the company in Australian assets, including property and ordinary shares.

Peter, owner and principal financial adviser of Easy Mark Financial Services Pty Ltd, was observed by employee and Authorised Representative Robert, making regular cash deposits into an intelligent deposit ATM at the bank across the road from the office.

When Robert asked Peter about it, Peter replied that he was depositing money into an investment trust on behalf of the firm’s New Zealand client, NZ Ethical Investments.  He added that it was all part of Easy mark’s comprehensive service to clients.

Robert conducts a Google search on NZ Ethical Investments and sees that it is not a listed company.  He becomes suspicious when he finds they have been in the news for alleged criminal activity in the past.  Robert is suspicious that his boss Peter is involved knowingly or unknowingly in money laundering activity with NZ Ethical Investment. 

What are two actions that Robert should take?

  1. _______________________________________________________________
  2. _______________________________________________________________

Question 44

You are conducting the first interview with a recently divorced female aged 63 who has engaged you to help her get back on her feet financially after the end of her 30 year marriage.    When you ask her about her income, she tells you that her only source of income is her Centrelink Wife Pension which she has been receiving since 1994.

What are two actions that you should take?

  1. _______________________________________________________________
  2. _______________________________________________________________

Question 45

Like the Corporations Act 2001, the AML/CTF Act differentiates between wholesale and retail clients.

This means that for wholesale clients, financial planners are not required to undertake customer due diligence or submit Suspicious Matter Reports with respect to wholesale clients.  Is this statement TRUE or FALSE?

Question 46

Scenario

Renato is an advice provider who is providing personal advice to a client Michael.  Michael wishes to sell his personally held investments which consist of property and shares.  Michael has held most of these assets for more than 15 years and some of the assets were purchased only six months ago.

Michael is 59 and intends to contribute the sale proceeds to his superannuation in preparation for retirement.

PART A

Michael and Renato agree that the subject matter of the advice is “Superannuation – Sale of Assets and Subsequent Contribution into Superannuation”.

Q. Besides the taxation consequence of the sale, write down two (2) other issues that would be relevant to the subject matter and, as such, should be included in Renato’s advice?

1. _________________________________________________________________________________

2. _________________________________________________________________________________

PART B

Included in the scope of the advice is the taxation consequence of the sale.  Renato knows that he has to either provide the advice himself or to refer it to a competent tax practitioner.

In accordance with section 961B(2)(d) Corporations Act (the safe harbour), Renato assesses  whether he has the expertise required to provide Michael with tax advice.  Renato is registered with the Tax Practitioners Board and is able to provide tax (financial) advice however, he feels as though this may be outside his range of tax expertise.

Renato refers Michael to an external tax accountant, Mohammed who has the necessary expertise.  Michael will receive a referral fee from Mohammed when Michael engages his tax services.

Q. In regards to the conflict of interest, what is Renato’s obligation under the TPB Code of Professional conduct (choose one)?

  1. To identify that he has a conflict of interest in receiving a referral fee and to control the conflict
  2. To identify and disclose his conflict to Michael by advising him that he will receive a financial incentive if he engages the services of Mohammed
  3. To personally provide the tax advice to Michael as a registered tax financial) adviser
  4. To disclose his conflict of interest to Michael and if Michael so wishes, refer him to another suitably qualified tax adviser without the receipt of a referral fee or any other benefit

Q. In regards to the conflict of interest, what is Renato’s obligation under the FASEA Code of Conduct?  Is it?

  1. To identify that he has a conflict of interest in receiving a referral fee and to control the conflict
  2. To identify and disclose his conflict to Michael by advising him that he will receive a financial incentive if he engages the services of Mohammed
  3. To personally provide the tax advice to Michael as a registered tax financial) adviser even though he does not have the necessary tax knowledge
  4. Renato must not act on the conflicted referral. He must disclose his conflict of interest to Michael and if Michael so wishes, refer him to another suitably qualified tax adviser without the receipt of a referral fee or any other benefit

Question 47

With reference to the book, “What do Financial Planning Clients really want?”, 2012 by James Evangelidis, which of the following statements  is most unlikely to be true?

  1. When I visit a financial planner, I don’t want to be sold to
  2. I know my financial planner is listening to me because he doesn’t interrupt when I speak
  3. What I value most about my financial planner is honesty and transparency
  4. I feel that my financial planner was acting in my best interests because he took control and told me what is best for me

Question 48

In relation to The Psychology of Judgment and Decision Making, 1993 by Scott Plous, determine whether the following statements are true or false.

  • In regard to using objectivity as tool for improving the decision-making, the biggest culprit for making irrational decisions consists of biased perceptions and wrongly calculated outcomes. TRUE or FALSE?
  • Your memory is a better asset to improved decision making rather than open emotion-free assessment TRUE or FALSE?
  • Judgment and decision making depend heavily on situation-specific factors such as how much time a decision maker has available and what mood the decision maker is in. TRUE or FALSE?
  • Because judgments are so easily influenced by question wording and framing, the safest course of action is to elicit them in a variety of ways and compare the results. TRUE or FALSE?
  • The inclusion of a middle category encourages people to choose that category TRUE or FALSE?

Question 49

Scenario

Bob is a retired client, aged 66.  His spouse Anna is 61.  Bob meets with Roger, an advice provider to ask what he can do to improve his age pension.  Bob retired at 65 and as such has met the age 65 superannuation condition of release.  Bob was unsure about what to do with his $250,000 superannuation when he retired and has left it in the accumulation phase, from which he has made lump sum withdrawals every three months to help meet living expenses.  Bob’s spouse Anna is working 2 –days a week and has $100,000 in superannuation, all in accumulation phase.  Bob and Anna still have a $50,000 mortgage over their home and no other debt.  They also have a total of $80,000 in cash and term deposits.

What are two (2) possible strategies that Roger could discuss with Bob to maximise his fortnightly age pension payments on the basis of the assets test?

  1. ______________________________________________________________________
  2. ______________________________________________________________________

Question 50

Scenario

Mark is a 30-year old single client who asks his financial adviser Wendy to arrange a $100,000 margin loan and use a further $100,000 of Mark’s own money to purchase a portfolio of investments recommended by Wendy.  Mark is a high growth investor.

Mark and Wendy agree an asset-based advice fee of 1% of the margin loan, plus an asset fee of 1% of the $100,000 which is Mark’s own money.

Wendy recommends a portfolio of ordinary shares and installment warrants.

Questions

  1. Has Wendy breached the conflicted remuneration provisions of the Corporations Act? YES or NO?
  2. How could Wendy better structure her advice remuneration on Mark’s investment portfolio?

_____________________________________________________________________

  1. Does the FASEA Code of Ethics have anything to say, specifically on the matter of conflicted remuneration? YES or NO?

If so where?

Question 51

Clifford is 72 and wants to leave 2 x residential properties to his granddaughter Katie.  He consults Jeffrey a financial planner.  What should Jeffrey take into consideration in advising Clifford?

____________________________________________________________________

Question 52

Gloria, a financial planner, provides comprehensive financial advice to Alfred who is in receipt of a full age pension.  Gloria later discovers that Alfred owns three residential properties which he failed to mention during the fact find interview.

Is Gloria under any statutory obligation to report Alfred for welfare fraud?  Yes or No

If Gloria decides to report Alfred, how should she go about it?

_____________________________________________________________________

Question 53

  1. A Paraplanner must meet the RG146 training standards if he or she performs tasks that are directly related to the provision of financial product advice.  TRUE or FALSE
  2. An Australian Financial Services Licensee is responsible for the misdeeds of a Paraplanner who is not a RG146 compliant? TRUE or FALSE

Question 54

A financial adviser has been sent a confidential and sensitive medical report by his client’s doctor for life insurance purposes.  The doctor was properly authorised in writing by the client to release the report directly to the adviser.

However, the financial adviser leaves it on his desk overnight and the medical report is seen by the cleaner.  As fate would have it, the cleaner knows the client and is now privy to the confidential and sensitive information contained in the medical report.

The client’s privacy has been breached. TRUE or FALSE

The Australian Privacy Principles will be satisfied if the adviser seals the medical report in an envelope and sends it back to the client immediately by overnight courier.  TRUE or FALSE

What actions should the financial adviser take?

_________________________________________________________________________________

Question 55

In regard to the TPB Code of Professional Conduct

Code Item 6

“Unless you have a legal duty to do so, you must not disclose any information relating to a client’s affairs to a third party without your client’s permission.”

In relation to Code Item 6, TPB Code of Professional Conduct, which one of the following key differences between the confidentiality requirements of TPB Code compared to the Privacy laws is UNTRUE?

  • Under TPB Code Item 6, all client information relating to a client’s affairs is affected, not just personal information, as is the case with the Privacy Act
  • Under TPB Code Item 6, it is only necessary that the information relates to the affairs of a client. The information does not have to belong to the client, or have been directly provided by the client to the tax (financial) adviser.
  • Tax (financial) advisers can simply notify clients about how their personal information will be used
  • Client consent must be positive.  Tax (financial) advisers can’t simply notify clients about how their personal information will be used. Clients must take a positive step to authorise the disclosure of their information

Question 56

A client wants advice on investing $12,000.  What disclosure documentation does an adviser need to prepare?

  1. Statement of (personal) advice
  2. Statement of transaction
  3. Statement of (general) advice
  4. Record of advice

Question 57

In regard to the TPB Code of Professional Conduct

Code Item 5

“You must have in place adequate arrangements for the management of conflicts of interest that may arise in relation to the activities that you undertake in the capacity of a registered tax (financial) adviser.”

In relation to Code Item 5, TPB Code of Professional Conduct, which one of the following key differences between the conflicts of interests requirements of TPB Code compared to the Corporations Act is UNTRUE?

  1. Code Item 5 includes both actual and potential conflicts whereas the Corporations Act addresses actual conflicts only
  2. Code Item 5 is broader and requires that arrangements must be in place to avoid, control and/or disclose actual or potential conflicts whereas the Corporations Act merely requires that the client’s interests be prioritised (albeit supported by the s961 best interests duty and s912A (1) licensees must have in place adequate arrangements for the management of conflicts of interest)
  3. Code Item 5 applies broadly to the personal and professional conduct of all registered tax practitioners (in relation to the activities that a practitioner undertakes in their capacity as a tax practitioner), while the best interests duty/conflicts priority rule under the Corporations Act only applies to those providing personal advice to retail clients.
  4. Code Item 5 requires that if a tax (financial) adviser has a conflict of interest or duty, he or she must disclose the conflict to the client and must not act.  If the client wishes, the tax (financial) adviser may refer the client to another relevant provider if neither the adviser nor their principal will receive any benefits from the referral.

Question 58

A client wants urgent advice on investing $12,000 and the advice is provided over the telephone.   What documentation does an adviser need to give to the client within 5 days?

  1. Statement of advice
  2. Statement of transaction
  3. Financial Services Guide
  4. Record of advice

Question 59

If an Australian Financial Services Licensee is a corporate entity, it is necessary to list all of the directors of the company in the Financial Services Guide.  TRUE or FALSE

Question 60*

Mr & Mrs Farmer, both in their sixties, want to pass ownership of their rural property to their adult son.  The Farmers come to you for advice.  What factors should you consider in advising the Farmers?

_______________________________________________________________________________

 Question 61

TechCorp makes available a smartphone application (app) that recommends clients invest in a limited number of model portfolios. The portfolios have been created based on factors such as asset class, the allocation of growth assets, the rates of risk and return and the investment horizon.

TechCorp also provides qualitative commentary on various stocks within the portfolios, including the stock’s performance, dividend yield and suggestions of stocks that are appropriate for a first-time investor.

TechCorp does not ask clients for any personal information. Clients are presented with the four portfolio options and are able to choose which portfolio best suits their needs.

Question A.

Which type of advice is TechCorp providing?

  1. Scaled advice
  2. General advice
  3. Personal advice
  4. Factual information

Question B.

Does TechCorp require a Australian Financial Services Licence?  YES or NO

Question 62*

The Five (5) personality factors are

  • Openness
  • Conscientiousness
  • Extraversion
  • Agreeableness
  • Neuroticism

Which of the following traits best describes a person who displays an open personality?

  1. Always consistent
  2. Tends to be generous and trusting
  3. Intellectually curious
  4. Often careless

Question 63

All personal advice is scaled, or limited in scope, to some extent.  TRUE or FALSE

Question 64

In regard to FSG disclosure about remuneration, commission and other benefits, which of the following inclusion statements is INCORRECT?

  • Remuneration, commission and other benefits’ should include advice fees payable, commissions (upfront and trailing) received from product issuers and AFS licensees, and ‘soft’ dollar commissions or benefits.
  • Rather than including specific ranges, rates, comparisons, simple tables and formulas, it is sufficient to include a general statement that a benefit will or may be received and that clients can ask for further details to be provided.
  • all the information about remuneration, commissions and other benefits should be presented in one place
  • FSG to include information about the remuneration, commission and other benefits that a person has received or is to receive for referring another person to the AFS licensee or providing entity

Question 65

Consider the following statements / conclusions from Daniel Kahneman’s 2012 book, Thinking Fast and Slow.

A.  Hindsight is especially unkind to ‘agents for others‘ such as financial advisers because clients tend to blame advisers for recommended decisions that work our badly and give them too little credit for successful recommendations that appear obvious only after the fact. TRUE or FALSE

B.   Applauding a stupid investment decision that works out well is an example of the halo effect. TRUE or FALSE

C.   A client who is risk averse it is likely to evaluate their portfolio once a quarter because they find it difficult to make sensible decisions in the face of daily price fluctuations TRUE or FALSE

D.   It can be costly to be risk averse for gains and risk seeking for losses. TRUE or FALSE

E.   Small sample sizes can throw up all sorts of surprises so it pays to follow a fund manager who is in the middle of a hot hand TRUE or FALSE

F.   Investors tend to be risk averse when it comes to investment gains and loss averse when facing investment losses. Loss aversion in this instance means that investors unwittingly prefer to engage in risk-seeking behaviour and gamble on the hope that a bad investment improves rather than sell and accept the certain loss. TRUE or FALSE

G.  The stock market drops significantly in a single week and the media runs numerous stories relating to the adverse effects on millions of superannuation accounts, which causes many superannuation members to change their investments to more conservative options. This is an example of an availability cascade.  TRUE or FALSE

H.  ”If you set your goals unrealistically high you set yourself up for failure.”  TRUE or FALSE

Question 66

Identify scenarios and / or actions that are compliant with the letter of the law but non-compliant with the FASEA Code of Ethics.

Question 67

As an adviser specialising in insurance advice, I receive commissions for the advice I provide my clients. Is this conflicted and will I breach the Code of Ethics?

Question 68

As an adviser specialising in stockbroking, I receive brokerage fees for the advice I provide my clients. Is this conflicted and will I breach the Code of Ethics?

Question 69

As an adviser I have a referral arrangement with a Mortgage Broker. I refer my financial advice clients to the Mortgage Broker when my clients need help with their mortgage or any new loans. In return the Mortgage Broker gives me a $500 payment from the commission he receives for the loan/mortgage. Given this is not a financial product that is affected by the Code can I still receive this fee?

Question 70

An Ethical Dilemma

Paul and Mary have been married for 15 years and have two children.  They come to see you for full financial advice, including short term goal-based saving, long term retirement saving, joint investment, personal insurance protection to protect the two children in the event of a premature parent death or disability.

You provide your FSG and conduct an initial interview with both of them to explain your advice process, your fees and to ensure they understand the contents of the FSG and your proposed letter of engagement.

Paul and Mary agree to proceed; they both become clients, and with both of them present, you conduct a comprehensive interview to obtain their goals, personal & family circumstances, and financial information in order to determine their relevant circumstances.

The day after the second interview, as you are conducting your research and analysis, Paul phones to tell you that, unbeknown to Mary, he had a relationship with another woman which ended four years ago; and from that relationship has a five year old daughter.  He asks you to arrange additional investments and insurance protection on his life in favour of his daughter.

Paul insists that you act professionally and respect his confidentiality by not informing Mary.

Questions

  1. What do you advise Paul?
  2. What steps could you take to prevent this difficult circumstance arising again?

Question 71

Standard 6 – “You must take into account the broad effects arising from the client acting on your advice and actively consider the client’s broader, long-term interests and likely circumstances.”

Scenario

Alfred comes to see you for estate planning advice.  He is a 75 year old widower who wants to leave his $1.2M superannuation balance to his 45 year old son Sam, and two (2) residential properties to his 14 year old granddaughter Sarah.  Alfred alone is your client.

Questions

  1. In your advice, are you required to consider the implications for Sam and Sarah? YES or NO
  2.  Are you required to act in the best interest of Sam and Sarah? YES or NO
  1. Write down two (2) issues in the advice to Alfred that would have implications for son, Sam

_________________________________________________________________

_________________________________________________________________

  1. Write down two (2) issues in the advice to Alfred that would have implications for granddaughter Sarah

_________________________________________________________________

_________________________________________________________________

Question 72

Scenario

Frank and Fiona Farmer come to see you for estate planning advice.  They have owned and worked their $5M farm for the past 40 years and want to pass it to the next generation.

Their adult son Freddy has worked on the farm all of his life and wants to follow in his parents’ footsteps.  He wants to inherit the farm and continue the family farming tradition.

However, adult daughter Felicity is not interested in staying on the farm and is planning to move to the city soon.

Nevertheless, Frank and Fiona want their farm to continue down the generations, and also want to treat both children equally and fairly in their estate plan.  The farm is their only asset.  They have no superannuation or investments and very little savings.

Question

Write down two (2) issues relevant to the advice you provide to Frank and Fiona

_________________________________________________________________

_________________________________________________________________

Question 73

The market price of a bond with a par value of $1,000 and a coupon rate of 10% falls to $750.  What does the effective yield do?

  1. Rise
  2. Fall
  3. Stay the same

Question 74

William contacts Emma, his financial planner, for information and advice about investing an inheritance.  William recently received a cash inheritance and would like some information about possible options for investing it.

Scenario 1 – Statement made by Emma to her client William

“When receiving an inheritance, one option is to pay off debts such as a mortgage, personal loan, car loan or credit card debts. Paying off a loan will save interest, although you may incur exit fees and it may have taxation consequences if the loan is for investment purposes.”

Is this statement?

  1. General advice
  2. Factual information
  3. Personal advice

Does Emma need to operate under an AFS licence to make this statement?  YES or NO

Scenario 2 – Statement made by Emma to her client William

“Yes, I’ll take you through the investments we generally recommend to our clients. Generally, for clients who receive an inheritance, I would recommend that they first pay off loans such as personal loans, car loans or credit cards.  Reducing this debt has the effect of freeing up cash flow. Before paying off any debt, I advise clients to consider whether early termination or legal fees apply.”

Is this statement

  1. General advice
  2. Factual information
  3. Personal advice

Does Emma need to operate under an AFS licence to make this statement?  YES or NO

 Question 75

Rachel contacts Robert, her financial planner, for information and advice about salary sacrifice into superannuation.

Scenario 1 – Statement made by Robert to his client Rachel

“If you are on the highest marginal rate of income tax, salary sacrifice would allow you to reduce your annual income tax by about 15%

Is this statement?

  1. General advice
  2. Factual information
  3. Personal advice

Does Robert need to operate under an AFS licence to make this statement?  YES or NO

Scenario 2 – Statement made by Robert to his client Rachel

 “Salary sacrifice is a strategy that allows high income earners to save income tax by contributing to superannuation that part of their salary which attracts the highest rate of tax.”

Is this statement?

  1. General advice
  2. Factual information
  3. Personal advice

Does Robert need to operate under an AFS licence to make this statement?  YES or NO

Question 76

Is the following statement TRUE or FALSE?

”If you set your goals unrealistically high you could be setting yourself up for failure.”

Question 77

Scenario

A new client called Andrew visits you for an initial appointment.  Andrew is very well dressed and has the appearance of affluence.  During the initial first appointment, he asked a lot of questions about different investment options and structures.

This initial interview which would normally last for one hour only, dragged on for two hours and you didn’t get very far with the fact find because he asked so many questions.  After two hours, Andrew said he had to leave.  He complemented you on your knowledge and asked how much he needed to pay for the appointment as he likes to pay his own way.

You inform Andrew that even though your FSG states that the hourly rate is $300 per hour, the first appointment is complimentary.   You leave the room and when you return you find Andrew has tucked $600 under his empty coffee mug.

Questions

A. What would be two steps you should take after finding this money?

B. What two concerns might you have taking Andrew on as a client after this?

Question 78

Scenario

Your client Annette has recently finalised a divorce and her ex-husband has agreed to pay child support of $220 per week for their two young children who both live with Annette.

Annette is looking to get back on track financially now that the divorce is over. She works part time in a child care centre and earns $30,000 per annum, has $11,000 in cash (not secured in a safe) at home, $20,000 in super and owns her home outright.

Questions

A. What two financial risks to Annette are insurable?

B. What two financial risks to Annette are uninsurable?

C. How would you ask Annette about how she obtained such a large sum of cash (i.e. $11,000) at home?

Question 79

Read the following statements in the table below and determine whether the type of remuneration referred to is allowable non-conflicted remuneration (YES) or non-allowed conflicted remuneration (NO)

Reference: RG246

ARE THE FOLLOWING FORMS OF REMUNERATION ALLOWABLE OR NOT? YES / NO
A volume based bonus paid by an AFS licensee to an employee which is accompanied by an affirmation signed by both the licensee and responsible manager stating that a benefit is not intended to influence the advice given  
A commission paid by a property developer to an adviser each time one of the adviser’s SMSF clients purchases a property from the developer
A $1,000 bonus (over and above the advice fee charged in relation to a financial product) paid by a client from the client’s own funds and paid to an adviser as a one off payment.
A regular payment made by a margin lender, with client consent, to a financial adviser from interest income the margin lender charges and receives from its loan holders.
A one off non-monetary benefit valued at $275 paid by a product supplier to an authorised representative
Non-product related monthly payments paid by an AFS licensee to an authorised representative to cover business expenses incurred in providing advice on behalf of the licensee.
An AFS licensee waves the monthly licence fees of its representatives for every month that they reach their target amount of risk insurance premium
An AFS licensee receives a commission from a platform operator but does not pass on any portion of the commission to its advisers who provide advice to clients on behalf of the licensee. Instead, the licensee uses the benefit to pay for its operating expenses, such as information technology costs.  The licensee does not direct its representatives to recommend this platform and provides a wide choice of platforms on its APL
An asset fee charged on money that has been borrowed and invested
An asset fee charged on an investment product where the client participates in a dividend or distribution reinvestment plan in relation to that holding.
An asset fee charged on an amount that a client redraws from his home loan and invests in managed funds
An asset-based fee on instalment warrants where the asset-based fee is referable to the debt component of an instalment warrant.
An asset-based fee is a brokerage fee for arranging a share portfolio
A commission on a group life risk policy inside superannuation, provided that it is not a default superannuation fund or a MySuper fund
A commission on a new non-superannuation risk insurance product sold after 1 January 2020 where the upfront and ongoing commissions are is capped at 60% and 20% respectively  and satisfies the current clawback provisions

Question 80

Scenario

Kate and Jim seek advice from financial adviser Tom in regards to savings, investment, debt, superannuation, and financial protection on behalf of herself and her husband.  Kate is 48 years old and married to Jim 50 years old.  They have an 18 year old son Luke who suffers from Autism Spectrum Disorder.   Kate is an advertising executive earning $150,000 p.a. and Jim is a full time home Dad.

Tom provides comprehensive advice, summarised as follows:

  • A family budget which proposes cutbacks on discretionary spending and identifies $1,000 per month in savings
  • An investment recommendation with upfront and monthly contributions
  • An accelerated debt repayment strategy
  • A superannuation strategy for Kate with a binding nomination to Jim as beneficiary
  • A superannuation strategy for Jim with a binding nomination to Kate as beneficiary
  • Income protection, death, TPD and trauma insurance for Kate with a death cover nomination to Jim as beneficiary
  • Death cover for Jim with a nomination to Kate as beneficiary

Questions

Which Code of Ethics standard has Tom not complied with?

What should Tom have done to comply with the Code of Ethics?

To whom does Tom owe the best interests duty?

Question 81

Scenario

Bob is a 50 year old client who asks financial adviser Bill whether a SMSF is appropriate and if so, to help him set up the fund for him.

Bill fully explains the pros and cons of a SMSF and after two substantial interviews with Bob, he is satisfied that Bob understands trustee responsibilities and obligations; and that he is an experienced investor.

Bill recommends that Bob set up a SMSF and transfer money across from his existing retail super fund.  He further recommends that he uses ‘Super Admin R Us’ which a specialist SMSF administration company in which Bill has an ownership interest.

Questions

  1. Which Code of Ethics standard is Bill at most risk of breaching as a result of the advice
  1. What are two (2) steps Bill should take to ensure he complies with the Code of Ethics?
  1. What questions could Bill ask Bob to satisfy himself that the Bob understands the risks and benefits of starting up a SMSF?

Question 82

You are reviewing an existing client couple who are both in receipt of the full Age Pension.  As you are updating their income details when you realise that they have not been declaring to Centrelink an additional amount of income they now earn and, as a result, they have both receiving pension over-payments from Centrelink for almost a year.  What should you do?

  1. Inform your clients of the need to declare income and change of circumstances to Centrelink, and strongly recommend they contact Centrelink immediately
  2. Make a report to AUSTRAC in the form of a Suspicious Matter Report (SMR)
  3. Complete an online Suspected Fraud report to Centrelink / Services Australia
  4. Either 2) or 3) above

Question 83

Financial adviser Sarah conducts a public seminar on self-managed superannuation.  The audience are all members of the public attracted by a targeted marketing campaign.  Sarah’s objective is to provide as many of these people as possible with personal advice at a later time.

Sarah introduces herself by name and tells her audience that her Financial Services Guide is available at the front desk and at the door should anyone wish to take one.  She proceeds with her presentation which is general advice supported by factual information in the form of SMSF statistics.

Halfway through the seminar, an audience member askes Sarah a question about how this could apply to him.  Sarah instantly realises that she’s forgotten to provide the required s949A warning, and does so immediately by stating, ‘This advice may not be suitable for you because it is general advice.’

Has Sarah breached the Corporations Act? YES or NO

Is so, how has she breached the Act?

Question 84

SCENARIO

Sam is a provisional relevant provider who has completed the first two quarters of his professional year under the supervision of Anne who has been a relevant provider for 3 years.

Sam successfully completes the adviser exam and is authorised by ACME licensee.  Sam now commences the 3rd quarter of his professional year.  Under the standard terms of the work program he is now under the limited and indirect supervision of Anne.

Sam sees his first client alone.  He conducts the interviews, analyses the information; bases his advice on the client’s relevant circumstances; prepares his SoA and clearly explains the advice to the client, all without Anne’s presence or interference.  The financial product advice is implemented in full.  Later, the client complains about the recommended product.

 Question A

Who is responsible for the SoA and the advice it contains?

  1. Sam the provisional relevant provider (who is now authorised)
  2. Anne the nominated supervisor
  3. ACME the licensee
  4. All of the above

 Question B

What is the minimum requirement in terms of years of experience as a relevant provider for Anne to be a supervisor?

Question 85

A. Which of the following types of clients must receive a Product Disclosure Document (PDS)?

  1. Wholesale clients only
  2. Both retail clients and wholesale clients
  3. Retail clients only
  4. All clients

RG168.1 & RG168.16

 B. When providing advice to retail clients, which disclosure document is appropriate to each of the following three client questions?

  1. What service am I getting?
  2. What advice am I getting?
  3. If the advice is personal, what product am I buying?

Question 86

A. To make a complaint about share market insider trading, who should you report it to?

  1. ASX
  2. ASIC
  3. APRA
  4. AFCA

B. Where a client has a dispute with an Authorised Representative and the Licensee cannot resolve it, where should the Licensee direct the client next?

  1. ASIC
  2. APRA
  3. AFCA
  4. FOS

C. If you receive cash of $10,000 or more in payment for your financial services, to which organisation should you make a Threshold Transaction Report TTR)?

  1. YOUR BANK
  2. ASIC
  3. APRA
  4. AUSTRAC

Question 87

What is “Risk profiling”?

Question 88
A financial adviser attends a BBQ with some friends.  The friends are not clients and he is unaware of their personal circumstances. During a conversation, one person mentions he has some money to invest.  In response, the adviser starts discussing a new product that he says he likes, which he thinks the person may find interesting.  He goes to his car and brings back a Product Disclosure Statement (PDS) and gives it to the person. 
Question A. Has the adviser given factual information or provided general advice?

Question B. What should the adviser do next?

  

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