task 4 talks about adhering to the specific codes of conduct [Music] task 4 has 14 qualifying criteria let's look at task 4 qualifying criteria 10 explain the process of advice that should be followed by representative we have illustrated the fsp the representative and the client here we discuss the process of giving advice that should be followed by representative we will be looking at section 7 and section 8 of the code of conduct first let's look at section 7 of the code of conduct which covers information that must be provided to the client when providing and or giving advice this section deals with the information that an fsp must provide the client with regards to the financial service they are rendering when an fsp gives advice to the client the fsp must disclose and provide certain information relating to the financial services being rendered the fsp must inform the client of their responsibility in terms of providing accurate information it is important to remember that the client provides the fsp with certain information in order for the fsp to provide and or render a financial service therefore it is important that the information received from the client is accurate as well otherwise the fsp cannot give the correct advice or financial service it is also important to note that an fsp may not request the client to sign any written or printed documents unless all the required information has been included or sign a blank document so here we can see that this sets up the relationship between the parties client must give accurate information and the fsp cannot ask the client to sign anything unless the fsp has provided all the required information per section 7. the fsp must at the request of the client provide a statement of account in connection with the financial service rendered to the client fsp must provide a client with a statement of identifying and listing financial products still in existence at least annually these statements must include specific information we will explore this information a bit later let's start with when the fsp gives advice to the client they must provide certain information relating to the rendering of the financial service provider we can divide this information into three categories one general explanations two material information three specific disclosure in terms of general explanations the fsp is to provide the client with reasonable and appropriate general explanations of the nature and material terms of the contract and the transaction the fsp is to provide full frank and honest disclosure of information that is reasonably expected to be disclosed to enable the client to make an informed decision in terms of material information the fsp is to provide the client with material contractual information facts illustrations projections or forecasts that they have in terms of specific disclosure section 7 of the code of conduct goes into detail as to what needs to be disclosed section 7 paragraph 1c states the following information must be disclosed at the earliest reasonable opportunity and time one the name class or type of financial product two the benefits of the financial product and how they are calculated accrued and paid out three the specific information for financial products marked as an investment product or has an investment component 4. the obligation to the product provider nature extent and frequency of monetary obligation and escalation increases or additions 5.
the obligation to the fsp nature extent and frequency of monetary obligation 6. any special terms and or exclusions 7. any guaranteed minimum benefits eight how accessible will the funds be nine any early termination consequences ten tax implications 11 the cooling off period 12 the nature extent and frequency of payment of commission fees and or brokerage fees 13.
any and all risks associated with the product 14. the amount of the increase in premiums over the first five years then the basis of the increase over years six to 20 years not exceeding 20 years section 7 paragraph 1c subsection 3 states that specific information for financial products marked as an investment products or has an investment component needs to be provided and disclosed therefore when a financial product has an element of an investment then there is additional disclosure requirements that need to be provided to the client about the financial product let's go through these disclosures firstly the fees being levied in terms of one the amount and frequency of the fees two who receives the fees three the services or purpose of the fees 4 fees based on performance then we must include the frequency performance measure period and or other criteria and five where the structure of the investment has other underlying financial products then we must include the manner in which the client can determine the need value of the investment next we need to disclose how the value of the investment is calculated and the details of the underlying of other financial instruments we need to disclose the details on the post performance of the investment as well one on request of clients two over intervals that are reasonable for type of product and three include a warning that past performance is not an indicator of future performance we also need to disclose the details of any rebates on fees passed on to the client lastly any platform fees that are being charged to the client so now we have covered all the elements relating to when the fsp gives advice to the clients what information the fsp must provide or disclose when rendering the financial service in terms of specific disclosure section 7 of the code of conduct goes into detail as to what needs to be disclosed we will now cover facts that the fsp must tell and inform the client of their the clients responsibility in terms of providing accurate information it is the client's responsibility to ensure all facts disclosed are accurate and complete any information completed and submitted by the fsp the client must ensure it's accurate and complete the fsp must inform the client of possible consequences of misrepresentation or non-disclosure simply put the results of giving incorrect and incomplete information the fsp must supply the client on request a copy or record of any transaction requirements within reasonable time so we have seen that the client needs to ensure that they provide the fsp with accurate information and that any information that is used by the fsp is accurate because any misrepresentation or non-disclosure could have an adverse effect on the advice given and or provided next we cover the fact that an fsp must provide a client with the statement of identifying listing and mentioning products that are still in existence against annually this statements must include specific information this specific information is obligations the ongoing monetary obligations of the client benefits the main benefits provided by the product value of the investment if any where a product has been identified as an investment or has an investment component then the net value of that investment to the client must be disclosed commissions and fees any ongoing incentives commissions fees and brokerage fees payable to the provider must be disclosed this statement need not be provided with a client is aware or should be a way that the fsp does not render or has stopped rendering ongoing financial services in respect of the products concerned we have now covered all of section 7 dealing with the information that the fsp must provide the client with regards to the rendering of the financial service note that this section is long with a lot of details so make sure you go through it and understand all the requirements laid out let's look at section 8 of the code of conduct which covers what must be done before furnishing and or giving advice to a client before giving advice to a client an fsp must take steps to get from the client all available information about the clients situation financial product experience and objectives to enable the fsp to provide the client with appropriate advice the fsp must then conduct a financial needs analysis fna for short based on this information provided by the client in order to give advice from this analysis the fsp will identify the financial products that will be appropriate and suitable based on the client's risk profile and their financial needs this will however be subject to any limitations by the act or existing contracts once the fsp has identified financial products the fsp must then take steps to determine if the financial products identified wholly or partially replaces an existing financial product or products held by the client take note that when existing financial products are to be replaced by new financial products there is some disclosure that needs to be made so as mentioned earlier with a financial product or product held by a client is replaced wholly or partially the fsp should fully disclose the actual and potential financial implications relating to costs and consequences of such a replacement including where possible the following difference in fees and charges between the products special terms and conditions which may be applicable to the replacement product as compared to the terminated product examples of these special terms and conditions may be exclusions of liability waiting periods loadings penalties excesses restrictions and circumstances where benefits won't be provided impacts of age and health changes on the premium to be paid difference in tax implication material differences between the investment risk of the replacement product and the terminated product penalties or unrecovered expenses deductible or payable due to termination of products to what extent the replacement product is readily realizable or relevant funds are accessible compared to the terminated products vesting rights minimum guaranteed benefits or other guarantees or benefits that will be lost as a result or consequence of the replacement products any incentives remuneration consideration fees received directly or indirectly by the fsp in relation to the financial services offered for either or both the terminated and or replacement products the fsp must take reasonable steps to ensure that the client understands the advice given and is in a position to make an informed decision this is very important where an fsp provides and gives advice to replace an existing long-term insurance contract agreement or a policy with another financial product the fsp must notify the product supplier of the existing and the replacement long-term insurance contract agreement or policy of such advice it is important to note that this notice must be made after the advice was given but before replacement contract agreement or policy document has been submitted by the fsp where the client has not provided and or disclosed all the necessary information to the fsp or the fsp has not had sufficient time to conduct a complete financial needs analysis the fsp should inform and notify the client and ensure the client fully understands that a full analysis could not be performed there may be limitations on the appropriateness of the advice provided the client should take care to consider whether the advice is appropriate considering the client's objectives financial situation and particular needs whether client chooses to elect a transaction or financial product different from the one recommended by the fsp or relates not to follow and or take the advice of the fsp or wants more information then what the fsp can provide the fsp must notify the client of the risks and advise the client to take care that when selecting or choosing any product that he or she consider his or her needs objectives and circumstances that concludes section 8 of the code of conduct covering the process that the fsp must follow when furnishing or giving advice to a client we will have a look at some questions to test your understanding of the material you have just learned question 1 what should psyche tell his client about the fsp when rendering a financial service choose the incorrect statement a registration number b criticize or make claims regarding any financial products suppliers fsps or representatives c full business and trade names d name and contact details of the relevant compliance and complaints departments pause the video here and read the question again remember we are looking for the incorrect statements so what would saki not tell inform or disclose to his client and the answer is option b psyche should not criticize or make claims regarding any financial products suppliers fsps or representatives often you see people do this in society when they tell you why this company is not good and why this product is not good because they want to sell you their product when a representative is providing and rendering financial service they need to make sure they are doing what's best for the client and not what's best for themselves or their own pockets question 2 in order for zama a representative to determine her client's requirements she would have to conduct a financial needs analysis for her client this would include specific information that zama would need to get from the client which statement is false and is not required a how much the client earns total income b how much of his income is available for savings and investment purposes c what type of transactions the client needs to carry out and how many per month d what the client intends to do with the funds pause the video here and take a minute to read through the question and consider the options remember you are looking for what zama does not need to know from the client the answer is option d zama does not need to know what the client intends to do with the funds in order to make or do a needs analysis question three mohaw wants to purchase shares mohaw only has a grade 10 education and is a retired pensioner with little to no understanding of financial investments mohawk approaches musa an investment advisor at kaputrik to assist him in purchasing shares mohawk wishes to invest a sum of ten thousand rand and seeks a stable non-volatile share option to invest in choose the correct options below 1. musa must provide mohawk with a detailed written analysis of the various share options available for purchase musa has a duty to point out opportunities to purchase hedge fund instruments swaps etc two musa must establish mahal's financial situation and financial experience 3.
