FPC007B Client Engagement Skills

Task details

• This task covers Topics 1 to 2 and accounts for 20% of your final
• There are two (2) questions in this Answer all questions.
• Marks will be awarded for referencing and
• Your overall mark for this task will be rounded to the nearest whole
• Refer to the Criteria-Based Marking Guide for guidelines on what is expected for each
• Full workings must be shown for all calculations. Show all calculations in the text of your task and not attached as an appendix. Appendices to the task will not be
• Indicative weightings are noted beside each question. Use these weightings to assist you with your allocation of time and The weightings indicate the relative importance of each question.

State all assumptions used in providing your answer.

Independent research

For some or all questions in this task, you will be required to complete independent research beyond the provided materials. You will also be expected to analyse this research and use it to support your own reasoned conclusions.

This includes:

• consideration of multiple sources beyond topic notes or other provided resources
• sources included are academically sound and credible
• analysing and understanding the argument or information the source presents
• using the material appropriately to directly support your

Where significant independent research is required for a given question, it will be clearly indicated in the question instructions and the Criteria-Based Marking Guide.

Task referencing and presentation (5 marks)

Your task should be presented in a clear and appropriate format, with all sources correctly referenced and cited.

You are required to:

• structure a clear response to each question, using headings if required
• number questions (including sub-questions) and pages
• use correct font style and size
• ensure tables or graphs are clearly labelled and readable
• clearly set out calculations or workings, where they are required
• adhere to the task word limit
• cite sources and provide a reference list at the end of your task. It is recommended to use

Kaplan Professional’s preferred referencing style, Harvard (see Kaplan Australia: Harvard Referencing Guide, available from the ‘Build Your Skills’ hub in KapLearn), but the consistent application of any other referencing style will also be accepted.

Question 1         (15 marks | Word limit: 400 words)

You are required to select one (1) of the following two (2) scenarios. You will then be required to review your chosen scenario and analyse how issues in that scenario relate to the concepts of behavioural finance.

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 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 approach, however this would mean that she would have to work 5 years longer than she would prefer. Rosey chooses to maintain her current investments ‘as it gives her more certainty’.

For your one (1) chosen scenario:

• Identify the key behavioural finance issue presented in this scenario. Include in your response a brief definition of the (4 marks)
• Provide evidence from the scenario to support your (5 marks)
• Discuss the consequences of the impact of this issue in the context of the scenario provided if the issue is not identified and addressed (4 marks)
• Based on the scenario, identify how the issue impacts either the giving or receipt of information.

For example, what type of information is likely to be provided to investors in the scenario by the adviser, or what type of information would help the client in the scenario. (2 marks)

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).

Question 2         (30 marks | Word limit: 800 words)

You are required to select two (2) of the following four (4) scenarios. You will then be required to review each of your two (2) chosen scenarios and analyse how issues in each scenario relate to the concepts

of behavioural finance.

Scenario 1

Jack is a very experienced stockbroker who runs a boutique stock advisory business. His business proposition

is that he looks after his clients to get the best portfolio results in the market. He makes all decisions regarding their portfolios and due to his experience and knowledge he believes that he can get better results than other advisers and the market in general. He actively manages his share portfolios and trades for his clients regularly.

Scenario 2

Lucy likes to manage her own share portfolio and believes she has a good history of success. She particularly

likes banking shares as she ‘always does well with them’. She feels very strongly about staying away from

IT shares as her brother lost everything in the technology bust in 2001.

Lucy is watching the latest investment news flash and sees that the price of AB bank has dropped quite a bit. She gets excited as she feels they must be undervalued and quickly logs on to her trading account. Lucy buys

$50,000 of AB Bank shares as she recalls how successful her last bank share purchase was. One week later she is reading the financial news and the price of AB Bank has fallen again as there has been a significant compliance breach that has become more serious since it was reported last week.

Scenario 3

You are seeing a new client Bob who would like to discuss his financial goals and objectives. Bob for you the following assets:

• everyday cash account: $5,000
• cash savings (0.6%): $25,000
• investment portfolio: $100,000
• holiday portfolio: $20,000
• children’s education fund: $60,000
• credit card debt (18.5%): $25,000
• superannuation: $234,000

He is keen for you to review his investment portfolio only, as he has recently suffered some losses that he does not want to realise by selling the shares, as the shareholdings provide good income. Bob also does not like the loss!

You suggest that he also should consider his overall financial position and investments, including repaying his debt. Bob however says he likes to keep that separate and is making repayments of $500 per month.

Scenario 4

In the late 1990’s into 2000 there was a rapid rise in US technology stock equity and major investments

in internet and dot com related companies. The NASDAQ index grew over this time from 1,000 to 5,000 points as investors speculated on these tech stocks; and the projected profits and company valuations grew.

Ben’s brother lived in the US and kept telling Ben that these stocks were the next best thing and that everyone

was investing. He repeatedly told Ben that if he left it too late, he would miss out. Ben was generally

a conservative investor, however, he wanted to get in early and not miss the gains that were on offer. He quickly invested in three tech stocks, based on his brother’s advice and what other investors were doing. In 2001,

the bubble burst where a significant number of investors lost most of the value of these tech stocks with only

a few major tech companies surviving the crash. Unfortunately, Ben’s selected stocks did not survive the crash.

For each of your chosen two (2) scenarios, complete the following:

• Identify the key behavioural finance issue presented in this scenario. Include in your response a brief definition of the (4 marks)
• Provide evidence from the scenario to support your (5 marks)
• Discuss the consequences of the impact of this issue in the context of the scenario provided if the issue is not identified and addressed (4 marks)
• Based on the scenario, identify how the issue impacts either the giving or receipt of information.

For example, what type of information is likely to be provided to investors in the scenario by the adviser, or what type of information would help the client in the scenario. (2 marks)

Your answer for Question 2 should be in two parts: chosen scenario 1 and chosen scenario 2.

For each chosen scenario you must clearly state which scenario number you are addressing in your response as well as clearly labelling each part of your response to the specific questions (a) to (d).