QFA Financial Advice cheat sheet

Term assurance pays a lump sum only if death occurs within the policy term; no surrender value accrues.

Whole-of-life policies have no fixed expiry and build a surrender value; premiums are higher than term for equivalent cover.

Under the doctrine of insurable interest, a person may insure their own life or that of a spouse/partner/dependent, but not a stranger.

Utmost good faith requires disclosure of all material facts at proposal; non-disclosure or misrepresentation can render a policy voidable.

Suicide clauses typically exclude or limit payout within the first 12-24 months of a policy.

Section 40 (or equivalent) tax relief applies to premiums on qualifying life policies within the statutory cap; relief is granted at source.

A life policy held for at least 8 years and 1 day (or the 3/4 rule) is generally exempt from exit tax; gains are otherwise taxed at the exit tax rate.

Assignment transfers ownership of a policy; a mortgage protection policy is commonly assigned to the lender.

Occupational pension schemes are established under trust; trustees hold assets separately from the employer.

The maximum tax-relieved pension contribution is age-related (e.g. 15% under 30 rising to 40% over 60) applied to net relevant earnings.

Funding standard requires defined benefit schemes to hold minimum assets (MFS) to cover accrued liabilities; the Pensions Authority enforces this.

A defined benefit scheme promises a pension based on salary and service; a defined contribution scheme pays out the accumulated fund.

Approved Retirement Fund (ARF) options apply to defined contribution proceeds; ARFs allow ongoing drawdown with imputed distributions.

Pension drawdown income is taxed at the marginal rate; the tax-free lump sum is typically 25% of the fund up to the statutory cap.

The Pensions Authority regulates occupational schemes; the Financial Services and Pensions Ombudsman handles complaints.

A small self-administered scheme (SSAS) is a limited form of self-invested occupational scheme typically for small groups.

Compound interest: A = P(1 + r/n)^(nt); simple interest = P × r × t.

The real return = nominal return minus inflation; negative real returns erode purchasing power.

Diversification reduces unsystematic risk but not systematic (market) risk.

Risk/return relationship: higher expected return requires accepting higher volatility or credit risk.

Collective investment schemes pool investor money; UCITS funds are subject to diversification and liquidity rules.

Exit tax on life-wrapped funds and certain investment undertakings is currently 41% for individuals (verify current rate).

DIRT applies to deposit interest; the rate and exemptions (e.g. for certain non-residents) must be checked annually.

Know-your-customer and suitability assessments are mandatory before recommending an investment product.

Indemnity restores the insured to the pre-loss financial position, no better; new-for-old cover is an exception.

Average (under-insurance) clause reduces claims proportionally if the sum insured is less than the value at risk.

Excess is the first portion of a loss borne by the insured; a higher excess typically lowers the premium.

Subrogation allows the insurer, after paying a claim, to pursue third parties who caused the loss.

Contribution applies when multiple policies cover the same risk; each insurer pays its rateable share.

Household policies commonly exclude wear and tear, gradual deterioration, and damage from unoccupied periods beyond a stated limit.

Motor insurance must meet minimum third-party liability requirements; comprehensive cover adds own-damage and theft.

The principle of proximate cause determines which peril triggered the loss when multiple causes are involved.

Commercial combined policies bundle property, liability, and business interruption cover; check for gaps and overlaps.

Business interruption indemnifies lost gross profit plus increased cost of working during the indemnity period.

Public liability covers third-party injury or property damage; employer's liability covers employees (statutory requirement in many jurisdictions).

Products liability covers damage caused by goods supplied; it is often triggered by a defect in the product.

Co-insurance clauses require the insured to carry a minimum percentage of value; otherwise claims are reduced.

Claims-made policies (e.g. professional indemnity) respond to claims reported during the policy period, regardless of when the act occurred.

Material damage proviso in BI policies requires that the underlying property damage be covered for BI to respond.

Warranties and conditions precedent must be complied with strictly; breach can allow the insurer to deny liability.

PMI typically covers private hospital treatment, consultants, and diagnostics; it usually excludes chronic and pre-existing conditions unless underwritten in.

Underwriting can be moratorium (claims-based) or full medical underwriting; moratorium excludes conditions in a look-back period.

Waiting periods apply to new conditions (often 6-12 weeks for outpatient, longer for maternity).

No-claims discounts reduce premiums after claim-free years; claims can reset the discount.

PMI usually does not cover GP visits, routine dental, or long-term nursing care.

Income protection pays a proportion of income (often 50-75%) during incapacity; it differs from PMI, which pays treatment costs.

Critical illness cover pays a lump sum on diagnosis of specified conditions; survival periods may apply.

Excess and co-payment options reduce premiums by shifting a portion of the cost to the insured.

LTV = loan amount / property value; lower LTV typically attracts lower interest rates.

Mortgage protection life cover is usually required for the loan term and assigned to the lender.

Fixed-rate mortgages lock the rate for a set period; variable rates track the lender's standard variable rate.

Affordability assessments (stress tests) apply to mortgage applications under consumer protection rules.

Early repayment charges may apply to fixed-rate mortgages if repaid before the fixed period ends.

A mortgage is a secured loan; default can lead to repossession and sale of the property.

Tracker mortgages move with a reference rate (e.g. ECB) plus a margin.

Stamp duty/transaction taxes and legal fees are additional costs of house purchase.

A home reversion sells a share of the home to a provider for a lump sum or income; the seller retains a right to live there rent-free.

The price paid is typically below market value because the provider discounts for the right of residence and future value.

Reversion differs from a lifetime mortgage, where the borrower retains full ownership and the debt accrues interest.

The right of residence should be for life or until the property is vacated; it must be documented in the agreement.

Regulation requires independent legal and often financial advice before entering a reversion.

The provider bears the house price risk on its share; the seller retains risk on any share not sold.

Negative equity protection is not relevant in the same way as a lifetime mortgage because no debt accrues.

Tax treatment of the lump sum and any income should be confirmed; means-tested benefits may be affected.

APR (annual percentage rate) expresses the total cost of credit including fees; compare APR across products.

Consumer credit agreements must disclose the total cost of credit and the right of withdrawal within a cooling-off period.

Payment protection insurance (PPI) covers repayments during illness or unemployment; it is optional and must be sold fairly.

Credit scoring uses past repayment history, income, and existing debts to assess affordability.

Early settlement of a credit agreement may entitle the borrower to a rebate of charges.

Interest can be calculated on a flat or reducing-balance basis; reducing balance is cheaper over the term.

A guarantor loan involves a third party liable if the borrower defaults.

Consumer protection rules require affordability checks and prohibit misleading advertising of credit.

Credit unions are member-owned cooperatives; members must share a common bond.

Deposits (shares) are typically protected by a deposit guarantee scheme up to a statutory limit.

Loans are made from members' pooled savings; interest rates are capped by regulation in many jurisdictions.

Credit unions are regulated by a designated authority (e.g. the Central Bank or equivalent) and must maintain reserves.

The common bond may be based on locality, employer, or association.

Surplus may be distributed as a dividend on savings or a rebate on loan interest.

Members typically have one vote each regardless of shareholding.

Credit union insurance may include life savings and loan protection cover for members.

Debt management plans (DMPs) negotiate reduced repayments with creditors; they are informal and not legally binding.

A debt relief notice or equivalent statutory scheme may write off qualifying debt after a supervision period.

Debt settlement offers a lump sum less than the outstanding balance; creditors may or may not accept.

Fees charged by debt management firms must be disclosed; regulation varies by jurisdiction.

Insolvency arrangements (e.g. bankruptcy, IVA, personal insolvency) have long-term credit record consequences.

Creditors may continue to charge interest and take enforcement action during an informal DMP.

Priority debts (e.g. mortgage, tax) should be addressed before unsecured debts.

Consumers should be advised to seek independent debt advice before entering any arrangement.

Act in the client's best interests; conflicts of interest must be disclosed and managed.

Know your client (KYC) and suitability obligations require understanding the client's needs, objectives, and risk tolerance.

Confidentiality: client information may only be disclosed with consent or where legally required.

Treat customers fairly (TCF) principles require clear, fair, and not misleading communications.

Commissions and inducements must not compromise advice; disclose remuneration clearly.

Record-keeping and audit trails support accountability and regulatory compliance.

Professional competence requires ongoing continuing professional development (CPD).

Report suspected money laundering under anti-money laundering (AML) obligations; do not tip off the client.

Trustees must act in the best interests of scheme beneficiaries and in accordance with the trust deed.

The trustee board should include member-nominated trustees where required by regulation.

Trustees must ensure contributions are remitted within statutory time limits.

The funding standard and scheme funding obligations apply to defined benefit schemes; trustees must monitor and report.

Trustees must appoint and monitor professional advisers (actuary, auditor, investment manager).

Conflicts of interest must be identified and managed; trustees should maintain a conflicts register.

Statements of investment principles and member communications must be provided as required.

Trustees must report breaches of the law to the regulator where required and maintain adequate internal controls.