NZQA 31861 31862 & 31864 Investment Assets Financial Instruments and Services Assessment | Professional IQ College

31861, 31862 & 31864 Investment Assessment

Introduction

This assessment contains the information you need to determine competency for Investment:

Unit Standard 31861 – Gather and analyse information to determine client investment needs.

Unit Standard 31862 – Demonstrate and apply knowledge of investment assets, services, and financial instruments to meet client needs.

Unit Standard 31864 – Provide advice in an investment context using the Six Step Process

This document contains:

• Assessment Guidance
• Assessment Tasks 1-10
• Student Declaration Form
• Assessment Decision Form and Schedule Form

Assessment Guidance

The Assessment Process

To achieve the unit standard, you must complete and return to Professional IQ the following documents:

• Assessment answers for all questions or tasks.
• Student declaration form completed and signed.

The assessment is competency based and focuses on the application of learning in your future role as a financial adviser. The study guide provided for this unit standard contains the information necessary to develop your knowledge and understanding of investment concepts and principles.

The qualified assessor will use their professional judgement and subject-matter expertise to evaluate your assessment ensuring that it is:

• Valid: meets the outcomes and evidence requirements of the unit standard being assessed
• Fair: a fair representation of what you can do and or know against the outcomes of the unit standard
• Authentic: it must be your own work and must not be copied from any course materials or other sources
• Sufficient: answers must be full and complete enough for the assessor to judge competency
• Consistent: answers are consistent with the assessor guidelines and national consistency requirements.

The evidence you submit must comply with any policies & procedures of your organisation, codes of practice of relevant professional bodies or any relevant legislative and regulatory requirements.

Students With Specific Needs

If you have specific learning needs, you should have informed Professional IQ of these at the time of enrolment. This enables the Academic Manager to discuss with you what appropriate support is required to complete your study and assessments.

The Assessor Role

The assessor will consider all written evidence provided by you and decide if it is competent or not yet competent.

The assessor may require you to provide more evidence on one or more questions or tasks, if in their judgement they feel the answer is insufficient or incorrect.

Where there is not enough evidence to make a decision on competency, your assessor will send you a Further Evidence Required request (FER) which means you will need to supply further information. They may contact you to have a professional conversation or to clarify a point in your answer.

The assessor will complete the Assessment Decision Form, including any feedback and return the result to you within 10 working days of receipt.

Please retain a copy of your assessment work and assessment results.

The Appeals Process

An explanation of the appeals process can be found in the Student Handbook located on Professional IQ under Student Resources.

If you disagree with an assessment decision, please follow the guide and complete an Assessment Appeal Form and send it to Student Support at Professional IQ. An independent assessor will be asked to investigate the appeal.

Resources

A copy of the unit standard can be downloaded from NZQA.

It is important you fully understand the outcomes and evidence requirements of the unit standard including any special notes, references and definitions applicable. The study guide is your main resource for this assessment.

You should read the study guide for this unit standard (as part of your course work) to enable you to answer the tasks listed in this assessment document.

References

This list is provided as a guide for students who are seeking further sources of information on this module:

• Code of Professional Conduct for Financial Advice Services;
• Consumer Guarantees Act 1993;
• Fair Trading Act 1986;
• Financial Markets Conduct Act 2013;
• Financial Service Providers (Registration and Dispute Resolution) Act 2008;
• Financial Services Legislation Amendment Act 2019;
• Income Tax Act 2007;
• ISO 22222:2005 Personal Financial Planning – Requirements for personal financial planners, available from https://www.iso.org;
• KiwiSaver Act 2006;
• Trustee Act 1956;
• Trustee Amendment Act 1988;
• relevant industry codes of conduct;

and all subsequent amendments and replacements.

Definitions

Investment assets – financial and non-financial assets.  Financial assets include direct and indirect variants of cash, bonds, and equities, and may include financial derivatives of these.  Non-financial assets include real property and may include tangible assets.

Investment services – custody, wraps, platforms, Discretionary Investment Management Services (DIMS).

Six Step Advice Process – the financial services industry standard for the provision of personal financial advice internationally, derived from ISO 22222 Personal Financial Planning.

Student Declaration Form

Complete and attach to your assessment answers before submitting for assessment

The Tasks you submit for assessment must be your own work and cannot be completed by another person.  Initial each item on the list below to show you have read and understood the requirements of the assessment and that the submitted work is your own then sign the declaration.

Your own work means it cannot be copied from course materials or other text. Your answers must be in your own words.

I agree for my information to be shared with Ringa Hora Services Workforce Development Council (RHSWDC), the New Zealand Qualifications Authority (NZQA) and the Ministry of Education (MoE) for the purposes of moderation to ensure consistency and for verifying, recording and management of results.

Signed:  …………………………………………………………                    Date:  …………………..…

Assessment Tasks

You are expected to answer all the following questions in the blue shaded cells and save your assessment document with a new name with the unit standard number, your name and the date – e.g. 31859 John Smith 17 August

Task 1 (US 31861, 31862 & 31864)

For this task you must demonstrate how you have applied the Six-Step Advice Process to a range of client investment needs and scenarios.

You are required to:

• Use the Client Case Studies and Templates provided by Professional IQ
• Provide THREE sets of evidence for THREE different clients (saved as THREE SEPARATE PDFs).

You need to include three different types of clients from the following: (only one of each client type permitted)

• Individual
• Joint (including tenants in common)
• Partnership
• Limited Liability Company
• Trust

You will also need to provide a range of client investment needs and solutions to meet the requirements of this assessment. Each client file must have recommendations for at least one investment solution per client file.

Across all three client files, you will need to have recommended at least two different types of investment solutions. One of these must be a KiwiSaver solution; the remainder may be from direct equities; managed funds; direct property; bonds/fixed assets.

This assessment is not assessing what you do in your daily practice; it is assessing your ability to meet the requirements of the unit standard outcomes. The unit standards align to the Code of Professional Conduct for Financial Advice Services and therefore demonstrate your use of best practice.

You can use the Checklist to check off the documents you have submitted for each client; this will help ensure you are compiling and providing the correct documentation for each client.

Guidance Note For Task 1

Task 1 requires THREE sets of PDF documents, so to assist in the successful assessment of your portfolio we suggest you take the following approach:

Submission Of Documents

You are required to provide THREE separate sets of evidence demonstrating how you have applied the Six-Step Advice Process to a range of client investment needs and scenarios.

The assessment question provides a checklist of documents that relate to each step. You should use this checklist to ensure you include the necessary documentation.

Document Presentation

Prepare THREE separate PDFs, each containing one set of client documents clearly labelled as Clients 1, 2, 3.

Include a heading for each step followed by the documents for the step i.e. Step 1, Step 2, Step 3, Step 4, Step 5, Step 6.

Each set of client documents must contain the following items in this order:

1. Summary of the type of client (limited liability company, individual, trust etc), what you are doing for them (Investment advice/Retirement Planning/KiwiSaver/Direct Investments) and any other relevant background information.
2. A list of Steps 1 to 6 (use the checklist supplied) followed by the documents for the step i.e. Step 1, Step 2, Step 3, Step 4, Step 5, Step 6. Number the documents sequentially, so they follow the order in your PDF.
3. Documents must follow the Six-Step Advice Process chronologically. The documents must be in date order within each step, from oldest first to the most recent last.

Common Documentation

You will have documents common to most or all clients such as your disclosure statement or About Us document.  Include all common documents in each client set.

File Size

The maximum file size for uploading to the learning platform is 10Mb. If your file exceeds this limit, please split the file in two and ensure they are clearly labelled and remain in sequence.

Contact Student Support if you have any issues. Most importantly, if you want to ensure the assessment goes smoothly for you and your assessor, please follow the above instructions

Task 2 (US 31861 2.1)

Explain in approximately 100 words for each client how the listed external events could impact on their financial situation. In your answer, you will need to include how it could affect the values of their assets, earning capacity from both employment and investment income, and net worth.

• Changes to financial markets
• Changes to the economic environment

Task 3 (US 31861 2.2)

For each of the clients you have provided a portfolio of evidence for, document at least one reasonably foreseeable change in their situation and explain how this would impact on their needs and solutions. Your answer should be approximately 100 words for each client.

Task 4 (US 31862 3.1 & 3.2)

Explain in approximately 100 words for each of the clients you have provided a portfolio of evidence for the implications of the ownership structure, and any legal or tax implications relevant to the specific investment entity, including when you may need to refer the client to their other professional advisers.

You need to cover at least three of the following ownership structures:

• Individual
• Joint
• Tenants in Common
• Companies
• Trusts
• Partnerships

Task 5 (US 31862 3.3)

In approximately 100 words explain any limits to your adviser authority or personal expertise that you may encounter when creating investment solutions, and how you would manage these to ensure the clients’ needs are met appropriately.

Task 6 (US 31862 1.1)

Complete the following table to describe the investment assets (the number of key points you need to include is noted in the heading):

 Task 7 (US 31862 1.2)

Complete the following table to describe the characteristics of each of the following financial instruments.

• Managed investments
• Direct equities
• KiwiSaver

 Task 8 (US 31862 1.3)

Complete the following table to explain the following investment services:

• Custody
• Wrap Platforms
• Discretionary Investment Management Services (DIMS)

Task 9 (US 31862 1.4)

In approximately 200 words for each of the four main asset classes listed below, describe how any changes in the economic factors listed impact the performance of the asset classes. Your answer should be approximately 800 words in total.

Asset classes:

• Cash
• Fixed interest
• Equities (international and domestic)
• Property (direct and indirect)

Economic factors:

• International economic and business cycles
• Local economic and business cycles
• Interest rates
• Exchange rates
• Inflation
• Government monetary and fiscal policies
• Regulatory and tax regimes

Task 10 (US 31862 1.5)

Perform the time value of money calculations listed below. Student may use a financial calculator, spreadsheet or online calculator for these calculations.

• Present value of a future lump sum
• Present value of a future cash flow
• Future value of a current lump sum
• Future value of a cash flow
• Regular payment required to create a future value
• Regular payment from a current lump sum

• Present value of a future lump sum

You are due to receive $10,000 cash in 6 years’ time with an interest rate of 8.3% compounded annually.

What is the present value of this future lump sum

Present value of a future cash flow

You are making annual loan payments of $25,000, while being charged an annual interest rate of 9.6%, with the loan repayable over 9 years.

What was the original loan that was taken out?

Future value of a current lump sum

You have invested $23,000 into a term deposit today, at an interest rate of 8.3% compounded annually, for a term of 4 years.

What is the future value of the investment at year 4

Future value of a cash flow

You regularly make payments into a savings plan for three years, paying $1,500 per annum, at an interest rate of 5.7% per annum. Assume that the payment is made once per year, at the end of each period.

What is the total future value of these cash flows at the end of the third period?

Regular payment required to create a future value

How much would need to be saved each month in order to have $400,000 in 14 years’ time.  Assume that the interest rate paid is 12.4% compounding monthly throughout the savings term

Regular payment from a current lump sum

A retiree has saved $500,000 during their lifetime and wishes to withdraw $4,300 a month from this amount, how many months will the lump sum last if the interest rate earned on the remaining funds is 5.3%?

31861 Unit Standard Title: Gather And Analyse Information To Determine Client Investment Needs

Outcome 1: Gather Client Information To Determine Client Investment Needs.

Range evidence of three examples with a range of needs and complexities is required.

1.1 Identify client attitude to and capacity for managing risk in an investment context.

1.2 Identify client objectives that could impact on investment needs.

1.3 Collect information about personal client circumstances that could impact on investment needs.

1.4 Collect information about client financial situation that could impact on investment needs.

1.5 Determine client investment needs based on collected client information.

Outcome 2: Analyse Client Information To Determine Any Potential Impacts On Client Investment Needs.

2.1 Analyse client information to determine the potential impact of external events on the client financial situation.

Range impacts may include but are not limited to – values, of assets, earning capacity, net worth; external events may include but are not limited to – changes to financial markets, changes to the economic environment.

2.2 Analyse client circumstances to determine their potential impact on client investment needs.

Range must include the potential impact of reasonably foreseeable changes to client circumstances; impact may have affect product type or product structure;

client circumstances may include but are not limited to – job, relationship.

2.3  Analyse client information to determine the need for consultation with other specialists.

Range may include but is not limited to – legal, accounting.

31862 Unit Standard Title: Demonstrate And Apply Knowledge Of Investment Assets, Services, And Financial Instruments To Meet Client Needs

Outcome 1: Demonstrate Knowledge Of Investment Asset Classes, Financial Instruments, And Investment Services.

1.1 Describe investment asset classes in terms of types and characteristics.

Range asset classes may include but are not limited to – equities (shares); fixed interest investments including government and non-government debt; property investments; alternative investments such as derivatives, private equity, and hedge funds; cash; both domestic and international variations of an asset class are included where both are ordinarily available; characteristics may include but are not limited to – benchmark and long term expected return, risk, liquidity, mix of investment gain between income and capital growth.

1.2 Describe financial instruments in terms of types and characteristics.

Range financial instruments may include but are not limited to – direct equities, direct bonds, managed investments, KiwiSaver; characteristics may include but are not limited to – fee structures, liquidity, taxation, standard terms and conditions.

1.3 Describe investment services in terms of types and characteristics.

Range investment services may include but are not limited to – custody, wrap platforms, Discretionary Investment Management; characteristics may include but are not limited to – fee structures, liquidity, taxation, standard terms and conditions.

1.4 Describe the effects of changes in the economic environment in relation to the performance of asset classes.

Range economic environment may include but is not limited to – international economic and business cycles, local economic and business cycles, interest rates, exchange rates, inflation, government monetary and fiscal policies, regulatory and tax regimes.

1.5 Perform time value of money calculations to analyse or quantify common investment goals and objectives.

Range may include but is not limited to – present value of a future lump sum, present value of a future cash flow, future value of a current lump sum, future value of a cash flow, regular payment required to create a future value, regular payment from a current lump sum; results are not required to be generated from first principles or formula, use of financial calculator, spread sheets or software tools is acceptable, including on-line resources.

Outcome 2: Apply Knowledge Of Investment Assets And Services To Meet Client Needs.

2.1 Analyse the features, benefits, risks, and limitations of assets and services to identify the those that meet the needs and circumstances of the client.

Range KiwiSaver and at least one other from – direct securities, managed securities, and real property.

2.2 Apply quantitative analysis techniques to evaluate whether assets meet client needs.

Range quantitative analysis techniques may include but are not limited to – investment valuation and management, measuring share performance, measuring bond performance, evaluating managed investment performance, measuring portfolio performance.

Outcome 3: Apply Knowledge Of Client And Adviser Circumstances That Are Relevant To Creating Investment Solutions That Meet Client Needs.

3.1 Explain any particular asset ownership considerations that may arise with respect to the identified solutions, including the need to refer to the client’s other professional advisers.

Range may include but is not limited to – legal implications, tax implications.

3.2 Analyse the implications for investment solutions of common ownership structures.

Range ownership structures may include – personal ownership, joint tenants, tenants in common, companies, trusts, partnerships.

3.3 Explain strategies to address limits of adviser authority or expertise when creating investment solutions.

31864 Unit Standard Title: Provide Advice In An Investment Context Using The Six Step Process

Outcome 1: Provide Advice In An Investment Context Using The Six Step Process.

1.1  Establish and define the relationship with the investment client.

Range may include but is not limited to – meeting disclosure requirements; obtaining privacy acknowledgements; establishing scope of service, any known limitations to the service, obligations of parties; agreeing nature of remuneration for the service.

1.2 Determine client investment goals and collect qualitative and quantitative information required for the agreed scope of service.

Range may include but is not limited to – identifying objectives, needs, and priorities; collecting quantitative and qualitative information.

1.3  Analyse and evaluate client information to determine client’s financial situation.

Range may include but is not limited to – analysing client information compared to assessment of objectives, needs, and priorities; identifying any issues or concerns.

1.4 Develop investment recommendations and present to the client.

Range may include but is not limited to – modelling of alternative strategies; communicating how the advice meets the client’s needs and objectives; outlining risks and/or disadvantages of recommendations; establishing responsibilities of the parties.

1.5 Implement investment recommendations.

Range may include but is not limited to – negotiating any variations required for implementation; arranging client acceptance and sign off; communicating with client through the application process.

1.6 Monitor and review investment recommendations.

Range may include but is not limited to – establishing terms for review, timetable for review, responsibilities of the parties; assessing progress towards goals; determining any changes needed.