NZ CFS L5 Core flashcards
NZ CFS L5 Core · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- FMCA 2013
- The Financial Markets Conduct Act 2013 is New Zealand's principal statute governing offers of financial products, market conduct, disclosure and licensing of financial advice providers.
- FAP licence
- A Financial Advice Provider licence issued by the FMA authorises a business to provide financial advice through nominated representatives or advisers operating under that licence.
- Code of Professional Conduct
- The Code sets two standards for financial advice: ethical conduct (client interests first, integrity, transparency) and client care (suitability, competence, record keeping).
- Fair dealing provisions
- FMCA Part 2 provisions prohibiting misleading or deceptive conduct, false representations and unsubstantiated representations in connection with financial products and services.
- AML/CFT Act 2009
- Requires reporting entities to conduct customer due diligence, enhanced due diligence for high-risk customers and PEPs, report suspicious activity and retain records.
- Privacy Act 2020
- Governs collection, use, storage and disclosure of personal information through Information Privacy Principles, including mandatory notification of privacy breaches.
- Conflict of interest
- A situation where an adviser's or provider's interest could reasonably be expected to influence the advice given, requiring disclosure, avoidance or management.
- Client interests first
- The ethical standard requiring advisers to prioritise the client's interests over their own or their provider's interests when giving financial advice.
- Commission disclosure
- Written disclosure of commissions, trail payments and other remuneration received from product providers that could reasonably be expected to influence advice.
- Confidentiality obligation
- Client information may only be used for the purpose collected, unless the client consents or disclosure is required or permitted by law.
- Fact find
- The documented record of a client's personal circumstances, income, expenses, assets, liabilities, existing cover, goals and risk tolerance, dated and acknowledged.
- Sum insured formula
- Sum insured = debts + income replacement + education and final costs − existing cover − assets available to meet the need.
- Retirement funding gap
- The shortfall between required retirement income and guaranteed income such as NZ Superannuation, capitalised over the expected retirement period.
- Material change trigger
- A change in circumstances such as marriage, children, job change, mortgage or health that warrants updating the fact find and reviewing advice.
- Risk tolerance vs capacity
- Risk tolerance is the client's willingness to accept risk; risk capacity is their financial ability to bear it. Suitability requires the lower of the two.
- Suitability standard
- The recommendation must match the client's goals, financial situation, risk profile and needs and be the product most likely to meet those needs.
- Diversification
- Spreading investments across assets, sectors and geographies reduces unsystematic risk; systematic market risk cannot be eliminated this way.
- Product replacement analysis
- Comparison of costs, benefits, exit penalties and lost grandfathered features before recommending replacement of an existing financial product.
- Bond price relationship
- Bond prices move inversely to interest rates; longer duration means greater sensitivity to interest rate changes, alongside credit risk.
- Managed fund unit price
- The unit price equals the fund's total net asset value divided by the number of units on issue at the valuation point.
- KiwiSaver contributions
- Employee contributions of 3%, 4%, 6%, 8% or 10%; employer minimum 3%; government contribution 50 cents per dollar up to $521.43 annually.
- Official Cash Rate
- The Reserve Bank of New Zealand's policy interest rate; raising it tends to increase borrowing costs and reduce inflationary pressure.
- Real return
- The return on an investment after adjusting for inflation, approximately equal to the nominal return minus the inflation rate.
- Initial disclosure
- Written disclosure before advice covering licence status, adviser role, remuneration, commissions, conflicts, complaints process and dispute resolution scheme.
- Record retention period
- Financial advice records must be retained for at least seven years and be readily accessible to the FMA on request.
- Advice file contents
- The file should contain the fact find, risk profile, needs analysis, product research, recommendation rationale, disclosure and client acknowledgement.
- Ongoing disclosure
- Disclosure of material changes to previously disclosed information, provided to the client within a reasonable time after the change.
- Service agreement
- A document specifying review frequency, scope, cost and client responsibilities for the ongoing advice relationship.
- Trigger-based review
- A review prompted by a life event such as birth, death, divorce, redundancy or inheritance, or by market or product changes.
- Dispute resolution scheme
- An approved scheme to which unresolved complaints must be referred, free to the client, as a condition of FAP registration.
- Competence requirement
- The Code requires advisers to have the knowledge, skills and experience to give the advice and to maintain currency through ongoing development.
- CPD log
- A documented record of planned, relevant continuing professional development activities linked to the adviser's role and the advice given.