Ch1 - The Financial Planning Process COPY Flashcards
Comprehensive Financial Planning is a _______ process that discovers client goals before exploring _______.
- client-oriented
- solutions
A team approach to financial planning utilizes a team of experts to…
cover topic areas (law, accounting, insurance, investments, and banking).
What are the THREE approaches to financial planning?
- single-purpose approach (one topic area)
- multi-purpose approach (two topic areas)
- comprehensive approach (all financial areas)
What are the 6 steps to Financial Planning Process?
- Establishing and Defining the Client-Planner Relationship
- Data Gathering and Define Client Goals/Objectives
- Analyze and Evaluate The Data
- Develop and Present Recommendations/Alternatives
- Implementing Plan
- Monitoring Plan
Define prospecting as part of the financial planning.
An approach to identifying potential clients. This could include specializing in a particular topic area.
Prospecting requires _______.
perseverance
What are the 6 approaches to successfully prospect a client?
- Define the Product
- Create an Ideal Client Profile
- Identify Target Markets
- Position Your Practice
- Build Prestige and Create Awareness
- Select Prospecting Methods
Explain the Data Gathering step of the Financial Planning process
Establishes credibility and rapport with the client by listening carefully and learning as much as possible about the client and the client’s spouse and family.
This part of the Financial Planning process is a formal written agreement to define respective roles and personality compatibility of client(s) and the planner.
Define the Scope of the Engagement
Clients may struggle to articulate their goals and objectives. How can advisors help?
By clarifying the goals and checking for consistency across the objectives.
Recommendations and alternatives presented to clients should be _______ with their goals and objectives.
consistent
Advisors should acknowledge the clients desires and suggestions. But they should also…
critically analyze goals, techniques, and strategies to determine what suits client’s overall situation.
Recommendations and alternatives should be delivered in what manner?
appropriately
When implementing a Financial Plan, action items should be…(3)
- prioritized
- put in a realistic timeline for the client
- contains specific milestones toward accomplishing full implementation
Because life is dynamic, changes to a Financial Plan are _______.
inevitable
Significant time passing between updates to a Financial Plan may merit a _______.
new plan
What are the are FIVE distinct phases in an individual’s financial life cycle?
- early career (ages 25-35)
- career development (ages 35-50)
- peak accumulation (ages 50-62)
- preretirement (3-6 years before planned retirement)
- retirement (ages 62-66+)
Name the partners/participants involved in Financial Planning. (6)
- client
- attorney
- accountant
- insurance agent
- financial advisor
- registered representative
What are the SIX guiding ethical principles?
Integrity
Objectivity
Fairness
Competence/Prudence
Diligence
Confidentiality
In what THREE ways should ethical problems be resolved?
- ascertain as many facts as possible (get the facts!)
- examine existing options and/or find new options
- evaluate chosen options
Explain the concept of “wearing two hats”.
When financial planners act both as advisors and salespersons.
Identify the following compensation models.
fee = _______
commissions = _______
fees and commissions = _______
salaried compensation = _______
fee = compensated solely on the basis of the advice they provide
commissions = compensated based on the products they sell by the issuers of those products
fees and commissions = combination of fee and commissions from the sale of recommended products
salaried compensation = compensated by financial services firm by whom they are employed
What are the FOUR methods to treating risk?
- self-insurance or retention
- transfer through insurance
- reduce or avoid risk
- some combination of methods
Insurance and risk management is measured based ________, ________, and ________.
frequency, severity, and variability
What are the general rules when planning for insurance?
A) catastrophic losses = ______
B) small risk = ______
C) sufficient liquid assets = ______
- catastrophic losses = insure
- small risk = self-insure
- sufficient liquid assets = self-insure
When selling an additional or replacement insurance product, what must you demonstrate to the client?
A) _________
B) _________
- The need that the policy fills
- The proposed product is more cost-effective than alternatives
Investment recommendations should be based on the client’s
A) _________
B) _________
C) _________
- goals
- risk tolerance
- the rest of the plan
Appropriate investment vehicles can (be the same or vary) by client.
vary
It’s difficult to be an expert in ALL areas of tax planning. When giving tax advice, the financial planner should be careful not to…
engage in unauthorized practice of law (consider tax attorney)
While life insurance death benefits are generally income tax-free, they may have _______ implications
estate tax
While providing general information is not considered unauthorized practice of law, what is consider unauthorized practice?
drafting legal documents (eg - will)
