FPC007B - Client Engagement Skills Assignment

Assignment Task

Scenario 1

Neil Smith is an adviser in a wealth management business and provides securities advice to his clients on an ongoing basis. He is an active manager who follows a strict investment process and believes that, at any time, the market offers fair value. He reads the financial news every morning and regularly trades on behalf of his clients, based on his interpretation of that information.

Scenario 2

Sally is reviewing her client Rosey’s portfolio and her ability to meet her retirement and lifestyle objectives. This is in response to Rosey raising her concerns with Sally after a period of increased market volatility. Sally presents two key options to Rosey, based on her previous risk tolerance assessment and understanding of her retirement goals. One option means that Rosey needs to alter her portfolio to a growth portfolio with a 70% exposure to shares that would allow her to retire at her desired age of 62, on her desired income level of $50,000 per annum. The other option suggests that she retain her existing portfolio mix - which represents a more balanced investment approach, however this would mean that she would have to work five (5) years longer than she would prefer (to age 67). Rosey chooses to maintain her current investments ‘as it gives her more certainty’.

For your one (1) chosen scenario respond to the below questions. You should clearly state which scenario you are addressing in your response as well as clearly labelling each part of your response to the specific questions (a) to (d).

(a) Taking into account the theoretical principles in Kaplan Topic 1, identify the key behavioural finance issue presented in this scenario. Include in your response a brief definition of the issue supported by two (2) characteristics of that identified finance issue.

(b) Identify and describe three (3) examples from the scenario to support your assessment of the identified issue in Q1(a) above. 

(c) If the issue is not identified and appropriately addressed, discuss at least four (4) consequences you think the client and/or adviser would face due to the identified bias.

(d) Based on the scenario, identify how the issue impacts either the giving or receipt of information. You are required to identify and describe two (2) pieces of information. For example, what type of information is likely to be provided to investors in the scenario by the adviser, and/or what type of information would help the client in the scenario?

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