101-1 Personal Financial Planning Process

Question 1

Letter of engagement

Answer 1

Defines the legal relationship between the financial planner and the client

Question 2

Definition of financial planning

Answer 2

A collaborative process that helps maximize a Client’s potential for meeting life goals through financial advice that integrates relevant elements of the Client’s personal and financial circumstances

Question 3

Quantitative data examples

Answer 3

Current financial status (e.g., assets and liabilities), copies of wills and trusts, and a list of current investments

Question 4

Qualitative data examples

Answer 4

Financial goals and objectives, health status, and risk tolerance level

Question 5

Asset accumulation phase

Answer 5

Until age 45

Debt is high
Cash flow, net worth are low

Question 6

Conservation or protection phase

Answer 6

Age 45-60
Before retirement date

Cash flow, net worth are increasing
Debt is increasing

Question 7

Distribution or gifting phase

Answer 7

Age 60 or retirement age until death

Debt is low
Distribution strategies
Net worth, cash flow are higher