Financial Products and Services
Financial Products and Services tests product knowledge and the ability to match a product to a need without giving advice you are not licensed to give. Expect deposit product features, insurance limits, and referral boundaries.
Core rules
- Checking and savings are transactional and liquid; money market accounts typically pay more but limit certain transfers; CDs pay a fixed rate for a fixed term and charge an early-withdrawal penalty.
- Truth in Savings (Reg DD) requires disclosure of the annual percentage yield, fees, minimums and penalty terms before an account is opened.
- FDIC insurance covers $250,000 per depositor, per insured bank, per ownership category; NCUA provides the same for credit unions. Investments, mutual funds and annuities are not insured, even when sold at a bank.
- Safe deposit boxes are not deposit accounts and their contents are not FDIC-insured.
- IRAs have annual contribution limits and early-distribution rules before age 59 1/2.
- Refer investment, insurance and trust needs to a licensed or specialist colleague; suitability rests with the licensed representative.
Worked example
A customer has $100,000 for a home deposit in 12 months. A five-year CD would lock the rate but trigger a penalty on early withdrawal. A ladder of 3-, 6-, 9- and 12-month CDs, or a money market account, preserves access while improving yield. Explain the trade-offs and let the customer choose.
Traps
- Saying FDIC insurance covers everything sold in the branch.
- Quoting an interest rate instead of the APY.
- Recommending an investment product without a license.
- Ignoring liquidity needs and the early-withdrawal penalty.