Hi In X series 1 Ques 1.8,since the ques mentioned about ways to implement the goal keeping in mind the directors concerns(basically meeting the guarantee and lack of expertise issue) so I thought the answer along the lines of holding sufficient capital to meet the guarantee/investment strategy in assets to match this guaranteed liab/revising the guarantee as per the experience developing/using reinsurance/Outsourcing the planning work to consultants/actuaries/intro policy excess/underwriting etc. But the solution is completely different and it does not make much sense to me as it does not address the mentioned director's concerns. Please advise on where my understanding/thought process is incorrect in comparison to the answer that is mentioned.
Hi - the actions that you describe are the actions that could be taken by the provider of the financial products, eg an insurance company. But that isn't what the question is asking about: it's about the actions that FPG could take. FPG isn't a financial products provider, it is a professional sports body. Also bear in mind that the question starts by asking about how FPG could implement its new goal, which is stated as being 'to promote the financial security of members'. Thinking about the analogy with the State, it could do this through education, encouragement (eg facilitating members' access to financial products) or compulsion (eg requiring all members to have a certain minimum level of benefit/insurance provision). The concerns of the Board relate to just one specific suggestion that has been made about how FPG could implement the goal, this suggestion being about enabling access to financial products. In this respect, FPG is effectively a sales intermediary. The Board's concern is about being sued if what members end up getting from these products isn't what the members thought they were going to get - and with the FPG (as intermediary) being blamed for that. Hence the key mitigations are things like making sure that only 'preferred suppliers' are used, checking that the products that can be accessed would be suitable for these specific sportspeople, and the use of professional indemnity insurance. So (as ever) it was important to read the background information and the precise question wording very carefully - in order to understand what the goal actually is and what the concerns raised were specifically about (= not the whole goal, but just one possible way of meeting it). Hope that helps.
