NZQA Expiring unit standard
25648 version 3
Page 1 of 6
Title
Demonstrate understanding of investment concepts used by
financial advisers
Level
5
Credits
10
Purpose
People credited with this unit standard are able to demonstrate
understanding of:
–
investment asset classes and how they are utilised in
developing investment strategies for clients;
–
application of quantitative analysis techniques used by
financial advisers;
–
portfolio construction techniques used by financial
advisers;
–
the concept of balancing investment risk and return and
its relevance to work as a financial adviser; and
–
investment products and/or services as a financial
adviser.
Classification
Financial Services > Financial Advice
Available grade
Achieved
Explanatory notes
1
This unit standard may be assessed on job in the workplace using naturally occurring
evidence or in off job simulated work situations designed to draw upon similar
performance to that required in work in a financial services context.
2
References
Commerce Act 1986;
Companies Act 1993;
Consumer Guarantees Act 1993;
Credit Contracts and Consumer Finance Act 2003;
Electronic Transactions Act 2002;
Fair Trading Act 1986;
Financial Advisers Act 2008;
Financial Reporting Act 1993;
Financial Service Providers (Registration and Dispute Resolution) Act 2008;
Financial Transactions Reporting Act 1996;
Health and Safety in Employment Act 1992;
Human Rights Act 1993;
Income Tax Act 2007;
KiwiSaver Act 2006;
New Zealand Bill of Rights Act 1990;
NZ IFRS (New Zealand Equivalents to International Financial Reporting Standards)
available from http://www.nzica.com;
The Skills Organisation
SSB Code 100401
 New Zealand Qualifications Authority 2016
NZQA Expiring unit standard
25648 version 3
Page 2 of 6
Privacy Act 1993;
Reserve Bank of New Zealand Act 1989;
Securities Act 1978;
Securities Markets Act 1988;
Superannuation Schemes Act 1989;
Trustee Act 1956;
industry codes of practice;
and all subsequent amendments and replacements.
3
All activities must comply with any policies, procedures, and requirements of the
organisations involved; the standards of relevant professional bodies including codes
of ethics; and any relevant legislative and/or regulatory requirements.
4
Definitions
Effectiveness – gives an optimal result in balancing investment risk and return.
Financial situation – incorporates variables such as a client’s balance of assets,
liabilities, incomes, risks, needs and expectations.
Financial solution – recommendations on use of particular financial products and/or
services to fit the financial strategy.
Financial strategy – broad plan that accords with client’s stated goals, needs,
priorities, financial situation and risk profile, in a particular situation.
Investment strategy – specific plan that combines elements such as a planned
investment portfolio and cashflows as a component of the overall financial strategy.
Personal situation – incorporates variables such as a client’s personal relationships
and obligations, lifecycle stage, overall objectives, level of financial literacy.
Qualitative measures – concepts of quality based on variables such as fund
management structures, fund manager’s investment approach, client service
standards, or product entry/exit fees and rules.
Outcomes and evidence requirements
Outcome 1
Demonstrate understanding of investment asset classes and how they are utilised in
developing investment strategies for clients.
Range
asset classes include but are not limited to – equities (shares), fixed interest
investments (including government and non-government debt), property
investments, cash (including bank accounts and money market securities),
derivatives (including currency hedging).
Evidence requirements
1.1
Knowledge of investment asset classes is demonstrated in terms of types and
characteristics.
Range
The Skills Organisation
SSB Code 100401
characteristics include but are not limited to – benchmark and long
term expected return, volatility or risk, liquidity, tax treatment of
investment gain from both income and capital growth.
 New Zealand Qualifications Authority 2016
NZQA Expiring unit standard
25648 version 3
Page 3 of 6
1.2
Direct investments of asset classes are described and compared in relation to
assessment of risk, structures, and the taxation characteristics of both the client
and the types of investments.
1.3
Managed investments of asset classes are described and compared in relation
to assessment of risk, structures, and the taxation characteristics of both the
client and the types of investments.
1.4
Asset classes are described and compared in relation to local and international
investment.
Range
1.5
includes but is not limited to – hedged/unhedged, differences in
taxation.
Effects of changes in the economic environment are described in relation to the
performance of asset classes.
Range
economic environment includes 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.
Outcome 2
Demonstrate understanding and application of quantitative analysis techniques used by
financial advisers.
Evidence requirements
2.1
Application of quantitative analysis techniques is explained and demonstrated
for investment valuation and management.
Range
2.2
Application of quantitative analysis techniques is explained and demonstrated
for measuring share performance.
Range
2.3
interest rate measurement (simple, compound and effective),
present value of a future lump sum, present value of a future
cashflow, future value of a current lump sum, future value of a
cashflow, regular payment to create future value, regular payment
from a current lump sum, internal rate of return, inflation effects,
bond valuations, rate of return on an investment, average return,
measures of volatility (including probability, standard deviation and
tails).
price/earnings ratio, dividend yield, debt/equity.
Application of quantitative analysis techniques is demonstrated and/or
explained for measuring bond performance.
Range
The Skills Organisation
SSB Code 100401
demonstration includes – yield, price, annualised return;
explanation includes but is not limited to – yield, price, annualised
return, coupon, term to maturity, credit rating, pricing conventions,
 New Zealand Qualifications Authority 2016
NZQA Expiring unit standard
25648 version 3
Page 4 of 6
trading, cum-interest, ex-interest, interest to original subscriber,
capital and accrued components.
2.4
Application of quantitative analysis techniques is explained for measuring
property performance.
Range
2.5
Application of quantitative analysis techniques is explained for evaluation of
managed investment performance.
Range
2.6
includes but is not limited to – Alpha, Beta, Sharpe Ratio.
Application of quantitative analysis techniques is demonstrated and/or
explained for measuring portfolio performance.
Range
2.7
includes but is not limited to – initial yield, debt coverage ratio,
income yield, debt/equity ratio, common valuation methodologies.
demonstration includes – weighted average return;
explanation includes but is not limited to – weighted average
return, correlation coefficient of asset pairs, covariance.
Application of quantitative analysis techniques is explained for measuring
impact of foreign exchange hedging on investment return.
Range
includes but is not limited to – interest rate differentials in forward
exchange calculations.
Outcome 3
Demonstrate understanding of portfolio construction techniques used by financial advisers.
Evidence requirements
3.1
Modern portfolio theory is explained in terms of asset allocation and
diversification.
3.2
Fund management approaches are explained in terms of methodology and
diversification benefits.
Range
methodologies include but are not limited to – active/passive,
value/growth, sector allocation.
3.3
Currency hedging is explained in terms of methodology, risks, and benefits.
3.4
Dollar cost averaging is explained in terms of its benefits and application.
Outcome 4
Demonstrate understanding of the concept of investment risk and return and its relevance
to work as a financial adviser.
The Skills Organisation
SSB Code 100401
 New Zealand Qualifications Authority 2016
NZQA Expiring unit standard
Range
25648 version 3
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investment risk includes but is not limited to – capital risk, currency risk,
financial risk, market risk, liquidity risk, negative returns (losses), returns below
inflation rate, returns less than comparable products, inappropriate advice,
forced sale of assets at unfavourable time, over-concentration in single asset
type, returns outside the expected range.
Evidence requirements
4.1
The nature of investment risk is described in relation to different types of
financial strategies, financial situations and personal situations.
4.2
Processes and products for managing investment risk and return are evaluated
for effectiveness using appropriate quantitative analysis techniques.
Range
processes and products may include but are not limited to –
diversification (asset allocation, management styles such as
active/passive, international investments), absolute measures
such as standard deviation, Beta (passive), Alpha (active), risk
insurance, derivative products, currency management, dollar cost
averaging.
Outcome 5
Demonstrate understanding of investment products and/or services as a financial adviser.
Evidence requirements
5.1
Traditional investment products and/or services are compared and evaluated
using qualitative measures.
Range
5.2
includes but is not limited to – multisector funds, single sector
funds, direct bonds, direct equities;
evidence of comparison and evaluation of a minimum of two
products and/or services from each type in range is required.
Alternative investment products are described in terms of their unique
characteristics, and their contrast to traditional investment products.
Range
alternative investment products may include but are not limited to
– commodities (such as managed futures), ethical (responsible)
investments, financial derivatives, hedge strategies or absolute
return strategies, wine, art, antiques, real estate, private equity,
venture capital.
This unit standard is expiring. Assessment against the standard must take place by
the last date for assessment set out below.
The Skills Organisation
SSB Code 100401
 New Zealand Qualifications Authority 2016
NZQA Expiring unit standard
25648 version 3
Page 6 of 6
Status information and last date for assessment for superseded versions
Process
Version Date
Last Date for Assessment
Registration
1
20 February 2009
31 December 2017
Review
2
12 February 2010
31 December 2017
Review
3
19 February 2015
31 December 2017
Consent and Moderation Requirements (CMR) reference
0003
This CMR can be accessed at http://www.nzqa.govt.nz/framework/search/index.do.
Please note
Providers must be granted consent to assess against standards (accredited) by NZQA,
before they can report credits from assessment against unit standards or deliver courses
of study leading to that assessment.
Industry Training Organisations must be granted consent to assess against standards by
NZQA before they can register credits from assessment against unit standards.
Providers and Industry Training Organisations, which have been granted consent and
which are assessing against unit standards must engage with the moderation system that
applies to those standards.
Requirements for consent to assess and an outline of the moderation system that applies
to this standard are outlined in the Consent and Moderation Requirements (CMR). The
CMR also includes useful information about special requirements for organisations wishing
to develop education and training programmes, such as minimum qualifications for tutors
and assessors, and special resource requirements.
The Skills Organisation
SSB Code 100401
 New Zealand Qualifications Authority 2016