FSRE – Free Mock

The Senior Managers and Certification Regime was Implemented due to the lack of redress for those in charge when things go wrong, highlighted as a result of the credit crisis.  The new framework will help identify individual accountability if things go wrong and will regulate individual conduct and standards in the financial services industry. Senior managers in Enhanced firms will have a Responsibilities Map that identifies which manager is responsible for each area. This will assist the regulators in identifying who is responsible if problems arise.

Within the FCA Handbook the customer has cancellation rights in respect to most financial products, although there are some exemptions. For most investments and general insurance the statutory cancellation notice (cooling off period) is 14 days from when the contract begins or from when the terms are received. This allows the customer to change their mind without penalty. For long term life assurance, pensions and annuities the cancellation notice period is 30 days.

All retired people are expected to have a total income of a specified amount. Pension credit is paid to individuals who reach State Pension Age (SPA) and receive less than the Appropriate Amount. Pension credit comes in two parts: Guaranteed credit and Savings credit.

Guaranteed credit: Brings all income (not just state pension) from all sources to an appropriate level. The appropriate amount for singles is £227.10 p/w and £346.60 p/w if a couple.

Guaranteed credit is Means tested to £10,000. The first £10,000 of savings is ignored, savings above is deemed to generate £1 of income for every £500 (or part of) over £10,000. This reduces the pension credit by £1 for every £500 over £10,000.

This means Simon will be able to claim £67.10 in guaranteed credit. Calculated as follows:

£227.10 (pension credit) less £150.00 earnings less £10 reduction (£14,900 savings less £10,000 exemption = £4,900 (every £500 or part of generates £1 of income) = £10.

Mortgage payment protection insurance (MPPI) is a short term income replacement insurance policy designed to cover the monthly mortgage payments in the event that the borrower cannot work due to accident, sickness or unemployment (the self-employed are excluded from the unemployment element). It is a pure protection policy with no surrender value and can be obtained relatively cheap as there is no medical underwriting.

Following The Retail Distribution Review (RDR) financial advisers are required to obtain and hold an annual Statement of Professional Standing as evidence that they are meeting the standards, which will be issued by an accredited body. The FCA will monitor the bodies with a list in the FCA handbook. The accredited bodies have an obligation to ensure that advisers maintain the required standards.  An accredited body is The London Institute of Banking and Finance (LIBF).

Values can be defined as standards of behaviour and what a person considers important in life and what motivates them. They are the beliefs that guide a person’s actions and the type of person they are. There are personal and cultural values that apply and may differ from each person.

Capacity for loss can be defined as the amount a client can afford to lose without it affecting their standard of living. Whereas their attitude to risk can be defined as how much risk the client is willing to take.

Fiscal policy involves the actions taken by the government to either stimulate or calm the economy using a combination of taxation, spending and borrowing. When the government implements an inflationary budget they are trying to expand (inflate) the economy with lower taxes, borrowing and spending.

Deposit based investments are considered low risk as the capital remains secure. Any asset backed investment is considered more risky as the investor may get back less than what they invested.

The FCA "Fit and Proper" test is designed to set minimum standards in relation to those working in a controlled function. It covers honesty and integrity, competence and capability and financial soundness. Adverse credit will be detrimental in respect to meeting these standards.