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Contemporary Applications in Financial Planning > Ch1 - The Financial Planning Process COPY > Flashcards

Ch1 - The Financial Planning Process COPY Flashcards

1
Q

Comprehensive Financial Planning is a _______ process that discovers client goals before exploring _______.

A
  1. client-oriented
  2. solutions
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2
Q

A team approach to financial planning utilizes a team of experts to…

A

cover topic areas (law, accounting, insurance, investments, and banking).

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3
Q

What are the THREE approaches to financial planning?

A
  1. single-purpose approach (one topic area)
  2. multi-purpose approach (two topic areas)
  3. comprehensive approach (all financial areas)
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4
Q

What are the 6 steps to Financial Planning Process?

A
  1. Establishing and Defining the Client-Planner Relationship
  2. Data Gathering and Define Client Goals/Objectives
  3. Analyze and Evaluate The Data
  4. Develop and Present Recommendations/Alternatives
  5. Implementing Plan
  6. Monitoring Plan
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5
Q

Define prospecting as part of the financial planning.

A

An approach to identifying potential clients. This could include specializing in a particular topic area.

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6
Q

Prospecting requires _______.

A

perseverance

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7
Q

What are the 6 approaches to successfully prospect a client?

A
  1. Define the Product
  2. Create an Ideal Client Profile
  3. Identify Target Markets
  4. Position Your Practice
  5. Build Prestige and Create Awareness
  6. Select Prospecting Methods
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8
Q

Explain the Data Gathering step of the Financial Planning process

A

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.

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9
Q

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.

A

Define the Scope of the Engagement

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10
Q

Clients may struggle to articulate their goals and objectives. How can advisors help?

A

By clarifying the goals and checking for consistency across the objectives.

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11
Q

Recommendations and alternatives presented to clients should be _______ with their goals and objectives.

A

consistent

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12
Q

Advisors should acknowledge the clients desires and suggestions. But they should also…

A

critically analyze goals, techniques, and strategies to determine what suits client’s overall situation.

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13
Q

Recommendations and alternatives should be delivered in what manner?

A

appropriately

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14
Q

When implementing a Financial Plan, action items should be…(3)

A
  1. prioritized
  2. put in a realistic timeline for the client
  3. contains specific milestones toward accomplishing full implementation
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15
Q

Because life is dynamic, changes to a Financial Plan are _______.

A

inevitable

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16
Q

Significant time passing between updates to a Financial Plan may merit a _______.

A

new plan

17
Q

What are the are FIVE distinct phases in an individual’s financial life cycle?

A
  1. early career (ages 25-35)
  2. career development (ages 35-50)
  3. peak accumulation (ages 50-62)
  4. preretirement (3-6 years before planned retirement)
  5. retirement (ages 62-66+)
18
Q

Name the partners/participants involved in Financial Planning. (6)

A
  1. client
  2. attorney
  3. accountant
  4. insurance agent
  5. financial advisor
  6. registered representative
19
Q

What are the SIX guiding ethical principles?

A

Integrity

Objectivity

Fairness

Competence/Prudence

Diligence

Confidentiality

20
Q

In what THREE ways should ethical problems be resolved?

A
  1. ascertain as many facts as possible (get the facts!)
  2. examine existing options and/or find new options
  3. evaluate chosen options
21
Q

Explain the concept of “wearing two hats”.

A

When financial planners act both as advisors and salespersons.

22
Q

Identify the following compensation models.

fee = _______

commissions = _______

fees and commissions = _______

salaried compensation = _______

A

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

23
Q

What are the FOUR methods to treating risk?

A
  • self-insurance or retention
  • transfer through insurance
  • reduce or avoid risk
  • some combination of methods
24
Q

Insurance and risk management is measured based ________, ________, and ________.

A

frequency, severity, and variability

25
Q

What are the general rules when planning for insurance?

A) catastrophic losses = ______

B) small risk = ______

C) sufficient liquid assets = ______

A
  1. catastrophic losses = insure
  2. small risk = self-insure
  3. sufficient liquid assets = self-insure
26
Q

When selling an additional or replacement insurance product, what must you demonstrate to the client?

A) _________

B) _________

A
  1. The need that the policy fills
  2. The proposed product is more cost-effective than alternatives
27
Q

Investment recommendations should be based on the client’s

A) _________

B) _________

C) _________

A
  1. goals
  2. risk tolerance
  3. the rest of the plan
28
Q

Appropriate investment vehicles can (be the same or vary) by client.

A

vary

29
Q

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…

A

engage in unauthorized practice of law (consider tax attorney)

30
Q

While life insurance death benefits are generally income tax-free, they may have _______ implications

A

estate tax

31
Q

While providing general information is not considered unauthorized practice of law, what is consider unauthorized practice?

A

drafting legal documents (eg - will)

Contemporary Applications in Financial Planning (14 decks)

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