Tools and Techniques of Maintaining an Accurate Budget - Assignment Example

Name: College: Course: Tutor: Date: Short Questions 1. Key Attributes of a Finance Broker Professionalism: To attract clients and referees a finance broker ought to act in line with prescribed rules within and outside the organization. The broker should follow the laid down organizational or industry policies and codes of conduct and act as per the customary standards of behaviour in society and business. He/she should be ethical. Consistency: Financial brokers should be able to maintain steady contacts. Building and maintaining referral networks is best achieved by brokers who attend professional networking groups or associations then they will be able to profit and expand networks. Credibility: Referees and clients are drawn towards competent financial brokers. Therefore, the brokers need to be equipped sufficiently with skills and knowledge in order to perform dependably. Besides, experience in the field is very vital. 2. Tools and Techniques of Maintaining an Accurate Budget Even though offering clients ongoing service is crucial, the best way to attain this is to teach them how to manage their own finances. This is where budgeting tools and techniques are vital. Some of these tools include; a Comprehensive Budgeting Spreadsheet Template, IT services (Software), Support Services, Establishing a Cash Management System, a Savings Plan and a Debt Management Plan as well as Keeping Financial Records/Documents. A comprehensive budgeting template will guide the client on how to prepare a budget. It should be simple, have an automatic calculator. It should list all common expenses and permit straightforward addition and removal of expenses. In the present day technology has blossomed in every aspect of human nature. In finance there are also countless IT packages and applications with different levels of use from simple recording of day to day outlay to those that can manage finance situations wholly. Clients also need to be supported all through budgeting depending on their assessed condition. The clients need a cash management system to manage their incomes and expenses. This system should allow for liquid cash savings as well as capital accumulation for expenditure. A debt management plan will assist in knowing which debts to pay first especially those attracting high interest rates. Establishing a correct budget requires referral to previous financial records. Therefore, clients need to be advised and encouraged to keep their financial documents. 3. Attributes of a Broker Profile A broker profile is a helpful tool and discussion hors d'oeuvre when meeting with clients for the first time. As a financial broker my profile would list the following items: My name, contact details, and operating licence number My background and qualifications My role as a broker in serving clients Affiliations and participation in allied professional bodies My personal pledge to serve clients 4. Standard Variable Rate Loan versus a Fixed Rate Loan Standard variable rate and fixed rate loans are by and large suitable in diverse financial situations and for different types of lenders. The standard variable rate loan is a standard product offered by lenders in the Australian Brokerage Industry. It typically offers alternatives and is flexible. Standard variable rate loans incorporate various additional qualities and a few loan products have low down initial rates prior to moving to the standard rate. Also lump-sum outflow can be made exclusive of inviting a consequence. Fixed rate loans are conventionally linked with stiff conditions. A number of fixed rate loans penalise premature repayments implying that if the borrower’s financial position improves they will again have to pay a fee or keep the loan for the initial period then pay the complete interest sum. 5. Dealing with Risks I. Reasons for Varying Risk Control Measures after Implementation Risk control measures are available alternatives for avoiding or else mitigating a risk. Some of these measures are employed on a day to day basis but others are applied in particular conditions. After implementation, these control measures need to be monitored and reconsidered repeatedly so as to evaluate their effectiveness and to decide whether they need to be changed. The changes are triggered by variations in internal or external setting or because the initial measures were inappropriate or not implemented as they should be. II. Quadrants in Stakeholder Power/Interest Grid The Stakeholder Power/Interest Grid is a means that assists in sorting out stakeholders with increasing power and interest. The device assists one to focus on main stakeholders and on the other hand help in stakeholder prioritization. The Power/Interest Grid contains four quadrants as indicated in the figure below; Meet Stakeholder Needs Manage Stakeholder Closely Monitor Stakeholder Show Consideration to Stakeholder The upwards arrow shows level of stakeholder power while the horizontal arrow shows the level of stakeholder interest. III. Risk Appetite versus Risk Tolerance Risk Appetite is the quantity and kind of risk a business is willing to tolerate in tracking down its goals while Risk Tolerance is the extra definite maximum risk that a business is willing to accept as regards every pertinent risk. 6. Regulatory Requirements I. Credit Guide Contents A credit guide presents introductory information concerning the broker and licensee to a client. The instance at which a credit guide is presented relies on the type of entity along with the credit activities the entity engages in, except it should be ahead of you engaging in credit deeds with the client. A credit guide contains the following information: The entity’s name, contact details and Australian credit licence number or credit representative number Information regarding the process for resolving disputes with a client together with details to get in touch with the internal dispute resolution system and external dispute resolution system of which the entity is affiliated to Information that client is required to make available, Privacy, Regulator Information, among others II. Conditions where a Credit Contract may be Deemed Unsuitable (RG 165) If a client can act in accordance with their financial obligations under the credit contract by selling their principal place of residence Where a client finds out that they could only meet up the repayments by selling their home III. Difference in Penalties for Breach of A Legislated Regulation and A Code of Practice There is a significant disparity stuck between Legislated Regulation and Codes of Practice despite of their similar in nature. In a Code of Practice, the largely severe penalty is proscription of membership from an association while; in Legislated Regulation, suspension, fines, civil or else criminal court proceeding could be induced. There are several Codes of Practice in the finances industry and their application is reliant upon the services an entity provides. An example of a Code of Practice in the finance industry is the Mortgage Brokers Code of Practice together with MFAA or FBAA membership. IV. Organizational Internal and External Dispute Resolution System Dispute resolution refers to the processes and techniques that act as a means for differing parties to come to an agreement short of litigation. Below are ways in which organizational internal as well as external dispute resolution is undertaken: Acting in accordance with the rules: The internal justice system offers a pillar in the overall effort to reinforce accountability and guarantee responsible decision-making. Informal resolution of disputes: Parties are robustly encouraged to first try and resolve a dispute through informal channels to avoid needless litigation. Resolving disputes through negotiation, mediation and other alternative means is generally quicker, and time and again proves to be less stressful and less cumbersome than litigation. Administration of justice through the formal system: If parties are unable to resolve the matter informally if such methods are pursued, the staff member can contest such a decision through the formal mechanism. 7. Roles of ASIC, APRA and the ACCC I. Australian Securities and Investment Commission (ASIC) The Australian Securities and Investment Commission (ASIC) regulate Australian Companies, Financial Markets and Financial Service Organizations. As regards credit service, ASIC’s role is to: Guarantee openness, fairness, intelligibility and safeguarding of clients Periodical issuance of Regulatory Guidelines, Information Sheets, Reports and Consumer Papers in elucidating their regulation approach Giving practical direction to assist individuals and companies in understanding as well as interpreting their requirements II. Australian Prudential Regulation Authority (APRA) APRA is in charge of prudential regulation of individual financial institutions plus promotion of financial system steadiness in Australia. APRA’s specific roles include: Promoting safety and soundness in business behaviour and risk management Establishing and enforcing prudential standards and practices Collecting data for its own purposes and acts as a national statistical agency for the financial sector III. Australian Competition and Consumer Commission (ACCC) The ACCC is a self-governing legal authority and is Australia’s national trade practices and consumer protection law enforcement body. ACCC’s specific mandate includes: Make safe compliance with the TPA by responding to complaints and inquiries and by observing market conduct and initiating action when necessary Improve market conduct and enhance competition in its regulatory activities Prohibit unconscionable conduct in consumer and small business transactions 8. Activities to Maintain Knowledge of Financial Products and Services Researching: In order to offer value added services, expert brokers need to have stable understanding of the different lenders in the market and the benefits along with drawbacks of their services and products. This familiarity is gained via constant research of explicit lenders and their services and other product providers. This will enable the broker to have a detailed understanding of existing products and services plus their benefits. Training: To maintain knowledge of products and services, research alone is not enough. A professional broker is required to attend training sessions offered through industry conferences and taking on wider reading both on print and online. Connections with other Professionals: Linking with other professionals plays a key role in enabling a professional broker to maintain constant knowledge of products and services. These include economists, accountants, and solicitors, among others. 9. Identification Requirements for Companies and Trusts The following information and documentation is required for companies and trusts: Group Certificates for the preceding two financial years Business financials for the preceding two financial years such as tax returns For refinances, preceding 12, 6 or 3 months statements for any debts being refinanced and latest Council rates notice to confirm the real property number Most recent statement for any amount outstanding not being refinanced For purchases, a photocopy of the contract of sale (signed and dated) For construction loans, a reproduction of preset price building contract plus council stamped building plans Business or Trust Identification Contact details for the valuer to access the property Solicitor/Conveyance details; if a solicitor has not yet been chosen by the borrower, the broker may put forward appropriate options and improve their referral network Written documentation from lawyers, banks, accountants, financial advisers 10. Sources to Gather Material to Support a Recommendation to a Client The Client: The first source of information is the client. In order to offer fitting monetary solutions it is crucial to grasp the client’s characteristics, motivation as well as their personal drive. Client’s behaviour is mainly driven by the force within them; motivation. Understanding the client will open way for getting their problems and therefore presenting an answer that satisfies their needs and objectives. Financial Statements: Detailed evaluation of the client’s financial position is another key source of information when recommending a solution. This entails the client’s financial feat now and in future, financial position along with their credit rating. All this information is captured in the client’s present and projected financial statements, cash flow estimates, asset as well as liability standing and past performance against projections and targets. Specialist Advisors: Making recommendations to clients with complex financial needs requires extensive research and input. As a financial broker it would be difficult recommend an option without considering input from other specialist advisors such as economists, accountants, and lawyers, among others. Their advice will guide the broker in understanding the wider implications of each option and will as a result be in a more informed position when making recommendations to a client with complex needs. 11. Considerations when Dealing with the Client When presenting broking options to the client in a way that satisfies their level of financial familiarity and facilitates them to ask for explanations the following factors need to be considered: Client’s Needs and Objectives: The broker should establish a social contact with the client ahead of a business contact so as allow for open and free communication. This will enable the broker to recognize the client’s needs and objectives. Also, consider their level of financial understanding so as to offer advice at a level they can capture easily. It is important to be short and snappy, precise and make sure their issues are at the forefront. Moreover, the present day business environment is very dynamic such that clients present special needs that have to be thought about. Other Professionals Advice: Clients with composite needs usually present various credit confrontations that call for detailed solutions. Therefore consultation with other professionals will come in handy in searching for the most excellent solution. The clients need to be informed on the same so that they prepare for extra costs or time commitment required to facilitate meeting with the other professionals. Client Concerns: In addressing complex client needs, clients are more likely to have concerns. As a broker, the job entails making the clients at ease to speak out their concerns so as to offer recommendations along with resolutions for them to progress. 12. Benefits of Conducting A De-brief with a Client On the occasion of implementing a loan process, it is important to conduct a debriefing with the client afterwards because; Correct debriefing offers very useful information regarding future actions Correct debriefing assists the parties to highlight and positively iron out arising matters It also allows parties to re-assess the executed strategies for success along with failures Works Cited Khan, M.Y, Financial Services, Tata McGraw-Hill Education, 2004, Print. Read More