Broking Options: Client With Complex Needs

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Question :

written activity 

  1. Risk Issues. 

In a pamphlet that would be suitable to provide to clients, explain the risk issues that relate to each of the following:

  1. Borrowing risk and gearing.
  2. Specific product risk.
  3. Institutional risk.
  4. Risk factors and return expectations of the client.
  5. Volatility of income and capital.
  6. Complex Features of a Client Situation and Needs.

Explain each of the following complex features of a client situation and needs:

  1. Commercial loans.
  2. Chattel leases.
  3. Native title rights.
  4. Heritage issues.
  5. Contaminated sites or properties near noxious industries.
  6. Key Products Available In the Broking Industry.

Identify and categorise at least 4 of the key products that are available in the broking industry. 

This task must be completed within 30 minutes. 

  1. Legislation, Regulations and Codes of Practice.

Identify and discuss the various legislative requirements, regulations and codes of practice that affect the broking industry. 

written/oral Questions and research task (4 -5 line response)  

  1. Why is it essential for you to address a client needs and objectives in a manner that is consistent with their level of financial understanding? 
  2. How can you ensure that you address the needs and objectives of clients in a manner which directly applies to objectives and requirements they have disclosed?
  3. Briefly discuss how you can demonstrate high level verbal and non-verbal communication skills throughout your interactions with clients, including for clients with special needs. 

We can demonstrate high level of verbal communication by speaking clearly and staying calm. 

  1. What methods could you use to assist you in introducing services, strategies and recommendations to clients?
  2. Why is it important to use language that is clear and unambiguous, and to avoid the use of jargon when communicating with clients, in both oral and written communication?
  3. What information should be included in the disclosure of capacity to ensure that it is consistent with industry requirements and organisational guidelines?
  4. Briefly explain the important things to consider and discuss with clients, clearly and comprehensively, as you guide them through the broking options.
  5. What can you provide to a client to clearly explain the fees, charges and commissions?
  6. Why is it important to disclose the commercial relationship of the representative and their organisation to any of the products and services mentioned in plan?
  7. What types of issues will you need to use your professional judgement to identify and address? 
  8. How might you seek confirmation from the client that they understand broking options presented?
  9. Outline the steps that you should follow to respond to identified client concerns appropriately. 
  10. What will you need to do when clients request alternatives to your recommendations?
  11. What are the limits you will need to observe when you are presenting clients with broking options?
  12. Outline a basic complaint handling procedure that you could follow, maintaining communication channels, when dealing with a customer complaint. 
  13. How will you need to obtain agreement to proceed from clients? 
  14. What relevant documentation will you need to use to record your client interactions and to provide conformation to clients? 
  15. Why do you need to ensure that instructing or purchasing documents, where required, are signed by clients?
  16. What are the types of post-broking services you will need to clearly define and communicate to your clients? 
  17. Briefly discuss the organisational guidelines top follow when dealing with clients who have the following special needs:
    1. Visual or hearing impairment.
    2. English as a second language.
    3. Cultural differences.
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Answer :

FNSfmb503 present broking options to client with complex needs

written activity 

  1. Risk Issues. 

The risk issues that relate to each of the following:

  1. Borrowing risk and gearing – Gearing is borrowing or taking debt to invest in capital assets as compared to the equity. It is the measure of the financial leverage of the company.  Gearing comes from investing in the leveraged assets. The highly geared firm has high risk. Thus the borrowing risk changes with the risk of the investment in which the borrowed funds are invested. 
  2. Specific product risk- The risk is associated to the specific product or service. It is the possibility that the financial product selected by the client fails to fulfil the expectations of the client. 
  3. Institutional risk- This is the risk associated with a specific organisation. It is the possibility that the organisation is unable to achieve its objectives due to some unforseen reasons. 
  4. Risk factors and return expectations of the client-It is the possibility that the risk factors and return expectations of the client might change due to some changes in the future situations which are out of control. Thus the products and services selected by them do not fulfil their expectations.
  5. Volatility of income and capital- The risk that the future income and capital might change. The likelihood of change is uncertain and so is the level of change.   

  1. Complex Features of a Client Situation and Needs.
    1. Commercial loans- The commercial loan is carried out between the financial institution/bank and the business. The commercial loan is a debt- based funding for a short term of period. The loan is usually taken to fund large capital expenditures in the organisation or to meet the high operational cost which the organisation is not able to afford.  The commercial loans are provided to credit worthy business to ensure that it has enough cash flows to repay the loan.
    2. Chattel leases – Chattel leases is the most common way of borrowing funds to purchase movable personal property like a car. It is a commercial financial product and allows the borrower to get a car financed and repay in regular instalments.  The ownership of the vehicle is with the borrower but it is mortgaged with the financial institution/bank until the total amount of loan is repaid. The client/borrower can also opt for balloon re-payment or get its repayments rescheduled. 
    3. Native title rights – These are the traditional rights and interest in the land and waters of Aboriginal and Torres Strait Islander people. Under the Native Title Act 1993, the client holding the native title can make an application to the Federal Court and get the tile recognised by the Australian law. Until 1993, the Australian law did not recognise the right of indigenous people. However the NTA in 1993 lays down the procedure to give the natives the title claims. The act has been amended in 1998, followed by changes in 2007 and 2009. The natives are required to prove the title as per the requirements of the act or the tile might get extinguished forever. 
    4. Heritage issues- Heritage sites are the building that has been considered culturally important by the government to preserve. These sites are considered special to allow any demolition or change. Thus if the clients property is listed as heritage, the rule to keep it in original state applies.  The client doesn’t have much flexibility in renovating or extending the property.  The properties are old and thus have the issues of drainage, unsafe chimneys, higher heating cost, etc.
    5. Contaminated sites or properties near noxious industries- These sites are highly polluted and the cost to clean up these sites are very expensive. The lenders are less interested in providing loans for these sites because the resale value of the structures on these sites is low. The people living or working there are also exposed to serious health and safety concerns. 


  1. Key Products Available In the Broking Industry

4 key products available in the broking industry are :

  1. Mortgage Brokers- The mortgage and finance brokers in the industry helps the borrowers in selecting and then applying for mortgage finance for residential as well as investment in real estate.  It also includes refinancing the existing mortgages. 
  2. Insurance Brokerage- The brokers help the clients in identifying the insurance plans that fulfil their needs. The bag of products offered is customised to the needs of individual client. Thus they help clients in purchasing insurance policies.
  3. Stock Brokerage- This service provided advice to the clients on investing in the stock markets.  The stock market has a variety of products ranging from fixed interest securities to risky equity investments. The brokers help the investors in selecting a portfolio that satisfies the needs of the customers. 
  4. Commercial loan brokerage- The brokers help the business in acquiring commercial loans to meet the needs of their business. The loan can be for capital expenditure or operating capital. 

4.    Legislation, Regulations and Codes of Practice 

There are various legislative requirements, regulations and codes of practice that govern the different products and services provided by the brokers. The insurance industry is governed by the Insurance Brokerage industry rules, while the mortgage brokerage industry is guided by Mortgage & Finance Association of Australia (MFAA). ASIC provides regulatory guidance for compliance of financial service providers/brokers. 

The Corporations Act 2001 specifies that there should be:

  • a single licensing regime for financial sales, advice and dealings in relation to financial products,
  • consistent and comparable financial product disclosure,
  • a single authorization procedure for financial exchanges and clearing and settlement facilities.

In accordance with above the broker in order to provide financial product advice must be authorized under the Australian Financial services (AFS) license. The FSG guidelines lay down the disclosure of capacity by the finance broker to the clients. 

written/oral Questions and research task (4 -5 line response) 

Answer 1: 

While providing broking services the service provider gathers information from various sources. The information is in varying formats and may use core technical terms and terminologies. The clients on the other hand have different levels of financial understanding. Some might have basic knowledge about the financial terms while other might be completely new.  Thus it is the duty of the service provider to understand the level of knowledge of each client and provide them information in the manner which is easy for them to understand. 

Answer 2:  

The brokers can ensure that the objectives and requirements of the clients are met by indulging in high level of communication with the clients. The brokers should be good at interpersonal communication. They should be able to communicate effectively with the clients. They should be to initiate the discussion with simple terms.  The broker should not only listen to the client carefully but also ask various open ended and closed ended questions to understand their particular needs.  This will enable them to understand the needs of the clients clearly and address them completely.  

Answer 3:

The broking service provider can demonstrate high level of verbal and no verbal communication by being an active listener. The brokers should be able to make the customers feels comfortable with eye contact and friendly attitude. The broker should seem interested in knowing about the needs of the client.  They should reply in a clear, calm and focused to the queries and concerns of the client. The brokers should pay attention to the non-verbal messages conveyed by the customers like the facial expressions and tone of voice etc.

Answer 4:

The broking service providers often need to introduce services, strategies and provide recommendations to the client. This can be done using verbal communication followed by written information. The broker can explain his ideas to the customer with the help of interactive discussion and provide written information on the matter in the form of power point presentation or paper presentation folder. The broker can use various visual aids like tables, graphs, charts and statistics as they are more helpful in understanding a topic.  

Answer 5:

It is important to use clear and unambiguous language to ensure that the client clearly understands the information communicated to him. The client should not be left confused and unsure after listening or reading the information. The use of jargons may result in ignoring the important points by the client. This will make the client indecisive and incapable to taking correct decisions on products and services required by him. The client satisfaction will thus get reduced. 

Answer 6:

In order to ensure that the disclosure capacity is as per the industry requirements and organizational guidelines, the Australian Government lays down the FSG guidelines. The guidelines require that the financial provider should disclose to the client in the financial services guide the following regarding his capacity:

  •  if the broker is accredited to deal with only some restricted range of products,
  • if the broker or the organization has any relationship with the products,
  • should disclose name and address,
  • the means through which the broker is remunerated and 
  • the person or organization responsible for the conduct of the broker

Answer 7:

As the client is guided through the broking options it is important to consider the needs of the clients and provide them options that suit their needs. The broker should explain each option to the client and discuss the benefits and impact of each product on the client. The broker should explain the advantages and disadvantages of each option and the risk to which the client s exposed upon accepting a product or services. The broker should also discuss the underlying assumptions and possibilities associated with an option with the client. 

Answer 8:

The financial broker should clearly disclose to the customer the way in which he/she is compensated for the services provided to the client. The financial brokers are usually paid in three forms. In the form of commission paid by the bank for the services provided as a mortgage broker. This is normally the upfront payment calculated at a percentage of the loan amount or could be ongoing trailing commission. Secondly, the loan origination fee or loan processing fee paid by the borrower. This is again the percentage of the loan amount. The percentage can vary though.  Third form is as compensation from the lender for introducing the clients to them. The financial broker should disclose to the client the source of his earnings and the percentage or compensation amount whatever applicable. 

Answer 9:

It is important to discuss the commercial relationship of the representative and their organization to the products or services in order to maintain honesty and transparency with the client. The client has the right to know if the organization is working closely with any lender or bank and are commercially associated with each other. The relationship of the broker/organization and the product or service might affect the recommendations of the broker for them and hence is important for the client to know. The client should be informed so as to reject the offer if he finds that the recommendation is biased. 

Answer 10:

In case the financial service provider is unable to identify a correct product to suit the needs of the customer or is unsure depending upon the unique requirements of the customer, the service provider should use his professional judgment and consider other issues that may be needed before giving any advice to the client. The service provider should not hesitate to consider information available with other service providers, institutions whenever needed. If the broker is not able to address the issues of the customer they should refer the client to other service providers rather than providing clients with misleading information. 

Answer 11:

In order to ensure that the client has understood the broking options presented the service provider must provide the customer a wide range of options that suits the needs of the customer. The broker must explain the benefits and risk of all the products and explain how they are matching the needs of the customer. The customer should be allowed to ask various questions and raise queries to ensure that their doubts are cleared. The broker should respond to all the queries and questions and confirm from the customer of he is satisfied with the responses and have understood the options provided.  

Answer 12:

In order to respond to the concerns of the client appropriately the broker should follow the following steps:

  • Should listen to the client carefully
  • Ask question from the client to confirm his understanding of the concern
  • Should provide the information asked by the client accurately
  •  Should ensure that all the queries and concerns of the client are responded
  • Should try to answer all the reasonable requests
  • Should explain the client politely in case some requests are not met
  • Should take extra support and help if required to gather extra information
  • Should refer to other  personnel if required
  • Should check with the customer and ensure that they are satisfied with the response to their queries 

Answer 13:

If the client requests alternatives, the financial service provider should assess and evaluate different option on the basis of the requirements of the client and present a range of suitable solutions to the client. The service provider must ensure that the alternatives suggested suits the expectations of the client. He should present to the client the benefits and risk of all the alternatives clearly and accurately. 

Answer 14: 

The financial service providers should adhere to the limits imposed by the regulatory requirements or organizational guidelines, while proving the products and services to the customers. The financial advisers allowed to offer limited services and products to the clients based upon their experience, training, knowledge, expertise and the organizational requirements. The training and qualifications of the service providers define the level of services that they can provide to the customers accurately and confidently.  The service providers should adhere to the limits. 

Answer 15:

The complaint handling procedure should be such that satisfies the client by resolving his problem and also helps the organization to improve the services that lead to complaint by the customer.  The basic procedure for compliant resolution is :

  • Identify the reason for the complaint
  • Explain the customer how they can handle the complaint and the options they have
  • Explain the complaint resolution process to the customer along with the expected timelines
  • Explain the customer the actions available to him if the resolution of complaint takes too long or the solution is not satisfactory
  • Document the details of the complaint completely
  • Keep the client informed about the progress of the complaint
  • Provide the client with the contact information of the people to talk to in relation to the complaint

Answer 16:

Agreement to proceed from the client should be obtained in written form and not just verbally. In case the client is with special needs, it is advisable to have some other person with them for assistance. The service provider should discus all the steps that need to be taken once the client agrees to proceed. The process should be provided to the client in writing. The steps should be outlined in detail. 

Answer 17:

The financial service provider should ensure that all the interactions with the client are properly documented. The documentation includes:

  • the application made for the client manually or on computer,
  • the copy of disclaimers so that the client knows their responsibilities and the broker is not held legally responsible for the actions of the client 
  • all the disclosures in simple  language and 
  • written advice given to the service provider by the client or any advice given by the service provider to the client. 

All these documents and advice should be kept in electronic form as well as a hard copy file of all the original papers.  Once all the applications are made, the confirmation of the applications made for the client should be given in hard copy followed by an email if required. 

Answer 18:

The instruction to purchase should be given by the client in writing and duly signed. All the applications of the clients and purchasing documents by the clients should be in writing and signed by them.  The signature is necessary to ensure that the client is agreeing and giving permission to the service provider to act in a particular manner on their behalf. Thus the client shares the responsibility of the act of the broker on their behalf.

Answer 19:

The post broking services include the services to the client once the agreement is signed. The broker should communicate to the client in writing the post broking service so that the client understands the role of the brokers in future. The Post broking services include:

  • Update and changes in the situation of the clients
  • Update on the latest events
  • Ongoing financial services provided to the client and the maintenance of their investments
  • Specify any other after sales service provided by the organization

Answer 20:

The organisational guidelines to follow when dealing with clients with the following special needs:

  1. Visual or hearing impairment – These clients can be provided with audio recordings of the information or the hard copy of the information in Braille. Like the application forms or declarations can be provided in Braille. 
  2. English as a second language- The clients can be provided information in their own language. They can be also provided with an interpreter to help them understand English.
  3. Cultural differences- The cultural differences with the client can be addressed by providing information in gender specific ways. The broker can also speak to one or other gender.  The financial service provider should take care of some cultural specific acts which are considered disrespectful or challenging.