CMFAS RES5 Balanced Scorecard & Remuneration question: specified variable income for grading purposes

CMFAS RES5Balanced Scorecard & Remuneration

A representative receives an annual bonus that relates to financial advisory services provided across several calendar quarters. Under FAA-N20, how must the financial adviser treat this specified variable income for grading purposes?

A Measure the whole bonus against the non-sales KPIs of the single quarter in which it is paid
B Exclude the annual bonus from the balanced scorecard framework because it spans multiple quarters
C Apportion it across the relevant quarters, grading each amount against that quarter's performance
D Measure the whole bonus against the non-sales KPIs of the first quarter of the year

Show the answer and explanation

Answer: C. Apportion it across the relevant quarters, grading each amount against that quarter's performance

Where specified variable income (such as an annual bonus) relates to services over more than one calendar quarter, FAA-N20 requires the FA to apportion it using any reasonable method over those quarters and then determine the entitled percentage for each apportioned amount against the representative's performance in the same quarter.

Common mistake

Multi-quarter income is apportioned and matched quarter-by-quarter to that quarter's performance; it is neither excluded nor measured wholesale against one quarter's KPIs.

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Study note: Balanced Scorecard & Remuneration CMFAS RES5practice questions & mock exams

Related CMFAS RES5 questions

A representative's specified variable income for a transaction is S$1,500: S$1,000 is paid in the current quarter and S$500 is deferred and paid roughly a year later. Under FAA-N20, the deferred S$500 must be Under FAA-G14, which measure applies to a representative assigned a balanced scorecard grade of 'E'?A representative has 2 of 10 sampled cases with Category 2 infractions. On the percentage basis this equals grade D, but on the number-of-cases basis it equals grade B. Which grade does the FA assign for that quarter?

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Original study material mapped to the public CMFAS RES5 syllabus. Unofficial, not endorsed by MAS or SCI. Verify figures and rules against current guidance before relying on them.