125.179 Assignment 2

Assignment 2 Research and referencing (5 marks)

You are required to research beyond the subject notes in answering the questions in this assignment. Reference and cite all your sources when quoting or using material from external sources. Include a reference list at the end of your assignment.

You are required to:

• use appropriate presentation and format for your assignment
• demonstrate independent research and analysis
• demonstrate appropriate use of relevant references
• follow the Harvard referencing style as recommended in Kaplan Australia: Harvard Referencing Guide
• include a reference list at the end of your assignment following the recommended referencing style
• adhere with the assignment word limit.

Independent research

For some or all questions in this assignment, 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 conclusions.

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.

Criteria-Based Marking Guide for research and referencing

The Criteria-Based Marking Guide (CBMG) provided at the end of each question is designed to assist you to understand what is expected of you in each question and to let you know how your performance will be judged. It provides advice about the criteria used in the marking of the question and what discriminates between an excellent, satisfactory and unsatisfactory answer.

The below CBMG outlines the expectations for presentation and referencing in this assignment.

Section A (25 marks)

Question 1   NZ Financial Markets and Systems (5 marks | Word limit: 500 words)

Topic 2, PC1.1: Describe key factors in the economic environment that impact participants in the financial services sector.

As a financial adviser, you are often asked about when is the best time to buy property, and the very simple answer is 10 years ago! For many clients, the answer lies in affordability. But property is a cyclical investment.

Describe the current economic environment for property investing in New Zealand with reference to the stages of the business cycle. Disregarding affordability of home loan repayments, decide whether now is the time to invest in residential property in New Zealand.

You need to support your answer with reference to the business cycle, current regulatory environment, and the supply of housing. You may choose any town/city you wish to investigate to support your decision.

Note: You are required to undertake independent research to answer the questions.

Note: Please refer to the Criteria-Based Marking Guide to confirm all the elements required to fully answer this question.

The financial services market is an integral part of the national economy of any country. This causes the existence of the objectively available interconnection between the said systems. That is why, by the transformation of the outlined market, some changes in the functioning of the national economy and vice versa take place. The outlined processes become the most comprehensible in the process of studying of issues of the financial services market development in the environment of the active introduction of the information technology by financial companies in their work, that is, generally in the era of the information economy development. That is why, in view of the above, within the work, the purpose of the study was defined as follows: the identification and substantiation of the determinants of the financial services market transformation within the information economy. To achieve this goal, the following tasks were set and solved: to define the essence of the information technology market; to identify the nature of the information economy; to substantiate the advantages of information technologies introducing in the field of the financial services for their consumers and producers; to find out the main transformational processes in the financial services market functioning, which occur as a result of the active introduction of new information technologies in the field of financial services provision. Method. The classic methods of scientific research are used in the article, among which are the following: observation, abstraction, comparison, systematic approach, analysis, and synthesis. Results. The peculiarities of the financial services market development in Ukraine are investigated; the characteristic features of the influence of the information technologies introduction in the sphere of providing the financial services on their consumers and producers activity are analysed. The main determinants of the financial services market functioning during the era of the information economy development were also identified, which include the following: the introduction of the online platforms for the customers servicing, improving the quality of the banking settlement and cash services, change in the process of granting loans to the economic actors

Aggregate household wealth has increased in recent years as house prices have increased. The value of the New Zealand housing stock is now relatively high compared to other countries as a share of GDP. This is mainly due to land values increasing, rather than investment of resources into new and improved dwellings. By many accounts, investment into new physical housing stock has been too low relative to demand for housing services.

Housing affordability was becalmed in a sea of uncertainty for first home buyers at the end of the summer selling season.

The latest figures show mortgage interest rates, one of the main drivers of affordability for first home buyers, were as flat as a millpond in March.

The average of the two year fixed rates charged by the main banks declined by the narrowest of margins, from 5.09% in February to 5.08% in March, a decline so small it would make almost no difference to mortgage repayments.

That brings an end to the more substantial and steady declines that occurred over the previous 15 months, which saw the average two year fixed rates drop from 7.04% in November 2023 to 5.08% in March 2025.

There is no doubt the decline in mortgage rates improved affordability, and that improvement has been further enhanced because house prices have not had the sort of sustained increases that would normally accompany a substantial or prolonged drop in interest rates.

Topic 1:DETERMINANTS OF THE FINANCIAL SERVICES MARKET FUNCTIONING IN THE ERA OF THE INFORMATIONAL ECONOMY DEVELOPMENT

Shkarlet, S., Dubyna, M., & Zhuk, O. (2018). Determinants of the financial services market functioning in the era of the informational economy development. Baltic Journal of Economic Studies, 4(3), 349-357.(APA)

Shkarlet, S., Dubyna, M. and Zhuk, O., 2018. Determinants of the financial services market functioning in the era of the informational economy development. Baltic Journal of Economic Studies, 4(3), pp.349-357.(HARVARD)

The New Zealand property market, like other markets, follows a cyclical pattern with distinct phases. These phases include:

• Recovery/Growth:Characterized by increasing demand, rising prices, and a general positive sentiment.
• Peak/Boom:The market reaches its highest point with high prices and strong demand.
• Downturn/Recession:Prices start to decline, demand weakens, and the market becomes more cautious.
• Trough:The market reaches its lowest point, with low prices and minimal activity.

Criteria-Based Marking Guide for Question 1 — NZ financial markets and systems

Insert your answers to Section A: Question 1 below this line

End of answers to Section A: Question 1

Question 2   NZ Financial Markets and Systems (5 marks | Word limit: 300 words)

Topic 2, PC2.1: Identify key factors in the economic environment relevant to the type of financial advice solution being provided.

Some inflation is good for an economy, however, too much inflation is bad. Explain, using examples, the impact of inflation on the sharemarket and bond investors.

Note: You are required to undertake independent research to answer the questions.

Note: Please refer to the Criteria-Based Marking Guide to confirm all the elements required to fully answer this question.

Criteria-Based Marking Guide for Question 2 — NZ financial markets and systems

Insert your answers to Section A: Question 2 below this line

End of answers to Section A: Question 2

Question 3   NZ Financial Markets and Systems (5 marks | Word limit: 200 words)

Topic 2, PC1.2: Explain how these key factors impact participants in the financial services sector.

Interest rates, like other prices, are determined by the interaction of supply and demand (in this case, for money).

Falling interest rates can benefit those with large floating (variable) rate mortgages but can have a detrimental effect on investments for risk adverse retirees.

Interest rates are advertised based on the type of credit or savings product being offered. In any open economy there are several components to the interest rate.

Explain what the Official Cash Rate (OCR) is and describe the four (4) main components of an interest rate.

Note: You are required to undertake independent research to answer the questions.

Note: Please refer to the Criteria-Based Marking Guide to confirm all the elements required to fully answer this question.

Criteria-Based Marking Guide for Question 3 — NZ financial markets and systems

Insert your answers to Section A: Question 3 below this line

End of answers to Section A: Question 3

Question 4   NZ Financial Markets and Systems (5 marks | Word limit: 250 words)

Topic 3, PC1.3: Interpret disclosure and conduct obligations that apply to FAPs, FAs, and NRs.

The FSLA Act changes introduced a Code of Professional Conduct for Financial Advice Services.

Describe the conduct and competence requirements for financial advice providers and their advisers, who provide advice to retail clients in New Zealand.

Note: You are required to undertake independent research to answer the questions.

Note: Please refer to the Criteria-Based Marking Guide to confirm all the elements required to fully answer this question.

Criteria-Based Marking Guide for Question 4 — NZ financial markets and systems

Insert your answers to Section A: Question 4 below this line

End of answers to Section A: Question 4

Question 5   NZ Financial Markets and Systems (5 marks | Word limit: 250 words)

Topic 3, PC2.2: Interpret key provisions of financial services compliance legislation in terms of how they relate to the provision of financial advice services.

Jan has been managing her own portfolio of $500,000 of direct equities and managed funds. She has decided that she would rather use her spare time to improve her skills as an artist and has engaged you to take over the management of her portfolio. She expects regular electronic reporting, a meeting every six months and updates when there are financial markets changes that impact her portfolio. She is very keen to minimise her taxation obligations.

Explain the operation of a discretionary investment management services (DIMS) to Jan including the role of documentation and what rights the client has under a standard DIMS agreement.

Note: You are required to undertake independent research to answer the questions.

Note: Please refer to the Criteria-Based Marking Guide to confirm all the elements required to fully answer this question.

Criteria-Based Marking Guide for Question 5 — NZ financial markets and systems

Insert your answers to Section A: Question 5 below this line

End of answers to Section A: Question 5

Section B (25 marks)

Question 1   Case Study: Financial Markets Participants
(15 marks) | Word limit: 800 words)

Topic 1, PC1.2: Describe the roles of participants in financial markets and systems.

The New Zealand financial system is dominated by the banking sector. Banks in New Zealand are members of the New Zealand Financial Markets Association and thus have an impact on the 90-day bank bill benchmark rate. Banks provide KiwiSaver accounts, facilitate access to KiwiBonds, are the largest lenders in New Zealand and provide savings and term deposit accounts. Banks are clearly important to the financial markets and financial systems of New Zealand. Yet there have been times in the recent past where banks have had to have financial and legislative support from the New Zealand government.

Prepare a briefing paper for a government minister on the background of the most recent government guarantee support schemes. The paper should contain the following information:

(a)       A discussion on why the Crown Retail Deposit Guarantee Scheme was introduced, including the economic background at the time. (3 marks)

(b)       An explanation of the operational differences between the Crown Retail Deposit Guarantee Scheme and the Wholesale Funding Guarantee Facility that the government announced on 1 November 2008. (3 marks)

(c)       Reasons as to why both the schemes were ended, using the strengths or weakness of the economic conditions of New Zealand at the time as the basis of your explanation. (3 marks)

(d)       An explanation of the purpose and the projected benefits of the Resurgence Support Payment (RSP) scheme. (3 marks)

(e)       An explanation of what the primary role of government intervention is in financial markets. Describe what monetary policy levers governments traditionally use during times of uncertainty and volatility in financial markets. (3 marks)

You may use diagrams and bullet points.

Note: You are required to undertake independent research to answer the questions.

Note: Please refer to the Criteria-Based Marking Guide to confirm all the elements required to fully answer this question.

Criteria-Based Marking Guide for Question 1 — Case study: Financial markets participants

Insert your answers to Section B: Question 1(a)–(e) below this line

End of answers to Section B: Question 1(a)–(e)

Question 2   Case Study: Complaints Management and Regulatory Requirements (10 marks | Word limit: 500 words)

Topic 3, PC3.1: Interpret the Code standards of ethical behaviour, conduct, and client care as they apply to FAPs, FAs, and NRs.

Topic 3, PC4.1: Explain participant roles and responsibilities in resolving complaints and handling disputes in accordance with financial services legislation and regulations.

Complaints do not necessarily have to be resolved in favour of the client, however the complaint must be documented and attended to. Under Financial Service Providers (Registration and Dispute Resolution) Act 2008 — section 48, all financial advisers who provide advice to retail clients must belong to an external dispute resolution scheme.

There are four schemes approved by Consumer Protection to provide financial dispute resolution services. They are:

• Banking Ombudsman (BOS)
• Insurance and Financial Services Ombudsman (IFSO)
• Financial Services Complaints Ltd (FSCL)
• Financial Dispute Resolution Service (FDRS).

The following short case study is from the Financial Dispute Resolution organisation 2021.

Source: <https://fdrs.org.nz/resources/case-studies>.

Friendship tested

An older couple had been clients of an authorised financial adviser for over 20 years. They had become quite good friends and the adviser had handled all of their insurance and investment requirements.

Both of them were nearing retirement and felt their current home would not be suitable in the long term. It was a great property but on a hilly section and a long way from any shops.

They asked the adviser what they should do. He suggested they should sell their current property and buy a home better suited to their long-term needs. They started looking at other properties but could not find one that met all their requirements. The adviser then suggested building a new home that would be designed especially for them.

However, this meant the couple would need to sell their current property and live somewhere while their new home was being built. They did not like that idea. Fortunately, the adviser had built and sold homes in the past and knew the process very well. He offered to purchase the land and put them in touch with a house designer and builder, both of which the adviser had worked with previously.

A partnership was established between the couple and the adviser. They paid the adviser $20,000 as a ‘deposit’. The adviser used these funds to engage the designer, quantity surveyors and to cover other out‑of-pocket expenses. However, none of this was documented. The adviser purchased the section and the build planning started.

As time went on, the couple started to doubt their decision to build. The cost for the home had increased to quite a high level and the husband became concerned they would be in too much debt in their retirement. The couple decided to withdraw from the home build and asked the adviser to return the $20,000 deposit. The adviser declined, claiming it had been spent on out-of-pocket expenses and to cover the loss of the sale of the land.

The complaint was referred to a Financial Dispute Resolution Service.

Unfortunately, despite the adviser’s best intentions he had placed himself in a poor position.

Firstly, there was no doubt the service he had provided his friends and clients was ‘advice’. This meant as an authorised financial adviser he had a high level of duty of care. He should have followed a compliant advice process including documenting each step in the process. He had not done this.

Secondly, in relation to the deposit, there was no disclosure of what it would be used for and that it was non-refundable. When spoken to, the adviser stated that he was simply trying to help his friends find a new home that would suit their retirements needs. While this was commendable, the adviser needed to still follow all the compliance requirements of providing financial advice.

Through mediation and negotiation, the couple came to a private agreement with the adviser and the matter was resolved.’

(a)       Under the FSLA Act, did the adviser provide advice on a regulated product? Would there be opportunities for the clients to consider making a claim under other Acts that regulate the provision of financial services? Explain your answer using information from the case study. (2 marks)

(b)       Under the Financial Markets Conduct (Regulated Financial Advice Disclosure) Amendment Regulations 2020, what disclosure requirements are required? Explain your answer using examples from the case study or references to what should be disclosed at the different stages of financial advice. (4 marks)

(c)       What standards in the Code of Conduct for Financial Advice Services, if any, has the adviser breached? Explain your answer using information from the case study. (4 marks)

Note: You are required to undertake independent research to answer the questions.

Note:  Please refer to the Criteria-Based Marking Guide to confirm all the elements required to fully answer this question.

Criteria-Based Marking Guide for Question 2 — Case study: Complaints management and regulatory requirements

Note: To obtain full marks, answers to all parts of this question should demonstrate ample evidence of wider research (beyond the notes) that has been well integrated into the answer.

Insert your answers to Section B: Question 2(a)–(c) below this line

End of answers to Section B: Question 2(a)–(c)

Insert your reference list below this line