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Four ways to measure capacity for loss in drawdown

  • Describe some of the challenges over assessing capacity for loss
  • Identify ways to make it more successful
  • Explain the significance of annuities
CPD
Approx.30min

Overall, there is a reason why nobody has come up with the holy grail of a single capacity for loss calculation; because no one measure can deal with all situations. Instead, there has to be a combination of approaches, which gives you the provable, documented capacity for loss answer you need at the end. 

Andrew Storey is proposition director at EV

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CPD
Approx.30min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. Assessing capacity for loss does not appear anywhere in the FCA's rulebook, true or false?

  2. Which of the following is NOT one of the main ways of assessing capacity for loss, according to the author?

  3. In which set of circumstances does it help to ask the client about their capacity for loss?

  4. Dynamic correlation is when different assets move in the opposite direction, true or false?

  5. What is the drawback of getting a cash flow outcome on a single scenario?

  6. It is not always the case that an annuity will cover all of a client’s income target, true or false?

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You should now know…

  • Describe some of the challenges over assessing capacity for loss
  • Identify ways to make it more successful
  • Explain the significance of annuities

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