Ch2 - Case Studies And Live Clients

Question 1

There are strengths and limitations of financial planning case studies. What are the pros and cons to using a written case studies?

Pros

a) ______
b) ______
c) ______

Cons

a) ______
b) ______

Answer 1

Pros

a) applying concepts to client scenarios
b) integrating multiple topics
c) preparing for exams

Cons

a) real clients are dynamic
b) goals, priorities, and situations shift

Question 2

STRENGHTS and WEAKNESSES to using a fact finder.

STRENGHTS

a) _______
b) _______

WEAKNESSES

a) _______
b) _______

Answer 2

STRENGHTS

a) client feels included
b) builds sense of ownership

WEAKNESSES

a) relies on client input
b) can feel impersonal

Question 3

Interviewing a client in person, on the phone, or online is great for _______ and _______.

Answer 3

qualitative information and to discuss goals

Question 4

What are the THREE primary forms of structured communication?

Answer 4

counseling (helping clients)

interviewing (between two people for gathering information)

advising (providing suggestions and guidance)

Question 5

directive interview vs. non-directive interview

Answer 5

directive interview = advisor directs and controls the interview

non-directive interview = the client directs and controls the interview

Question 6

What is the distinction between financial advice verses a financial advisor?

Answer 6

financial advice - the actual suggestions and recommendations that anyone can give

financial advisor - a professional who works with clients to achieve their goals

Question 7

How can ethical behavior improve communication between a client and advisor?

Answer 7

Earning trust and making ethical decisions can break down communication barriers.

Question 8

What is the purpose of a financial advisor structuring communication with clients?

Answer 8

It determines the format, frequency, and subject matter of each interaction so the client is clear of the purpose for the interaction.

Question 9

Structured communication should be…

Answer 9

succinct and NOT cumbersome

Question 10

How should you manage emotions during a client interaction?

Answer 10

Talk about anxieties the client may have

Focus on feelings when they emerge because ​ignoring them is unproductive

Appropriately addressing feelings can build rapport with the client

Question 11

How can an advisor create an environment that promotes openness?

Answer 11

alleviating the concerns of clients

responding to the social style of clients

communicating effectively with clients

structuring communications with clients

Question 12

What are the FIVE barriers that can create tension between an advisor and client(s) in the financial planning process?

Answer 12

distrust of salespeople (fear of being talked into buying something)

fear of making a decision (that is, buyer’s remorse)

need for stability (people are complacent and prefer familiarity)

time constraints (reluctant to commit the time)

fear of fraud (identity theft, and investment firm failure)

Question 13

What are some tips to help alleviate client concerns during the financial planning process? (7)

Answer 13

Do not impose on clients

Be aware of verbal pace (calm, unhurried pace)

Listen carefully

Watch for nonverbal behaviors

Encourage clients to talk

Control one’s own anxiety

Be transparent (disclose compensation and fully explain product details)

Question 14

FOUR types of social styles.

Answer 14

expressive

amiable

driving

analytical

Question 15

People are like thermostats and seek to reach a state of equilibrium through…

Answer 15

social situations that reinforce their behavior and avoid situations that cause discomfort.

Question 16

An advisor should help the client feel at home by finding the proper balance of ______ and ______.

Answer 16

tension and stress.

Question 17

Consumers have a(n) ______ amount of resources (income & wealth) and time.

Answer 17

finite

Question 18

How do consumers decide to allocate their time?

Answer 18

work in the marketplace

create goods and services for the household

enjoy leisure time

Question 19

How must qualitative goals (intangible elements) be handled?

Answer 19

Broken out into quantitative goals (specific and measurable outcomes) to help clients to be more specific.

• general = retire in the next 5 years*
• specific = retire in 2023, withdrawing $50,000 each year*

Question 20

Because the future is uncertain and unknown, assumptions need to be…(2)

Answer 20

legally defensible

based on historical and future projections

Question 21

The Consumer Price Index (CPI) is a term used to describe what TWO separate inflation index measures?

A = ________

B = ________

Answer 21

A = CPI-U (87% urban consumers)

B = CPI-W (10% wage earners and clerical workers)

Question 22

This is the average change in prices for market basket of commonly used goods and services.

Answer 22

Consumer Price Index (CPI)

Question 23

Why should advisors be thoughtful and cautious in deterring appropriate assumptions?

Answer 23

Because over or under-estimating assumptions can greatly impact outcomes.

Question 24

What is the distinction between personal planning and business planning?

Answer 24

personal = lifetime and estate planning for clients and family members

business = strategic and operational planning for business owners

Question 25

How should an advisor address personal and business planning? separately or together?

Answer 25

BOTH

Question 26

What is the purpose of a preliminary outline and a master outline?

Answer 26

preliminary: a template for the different areas of comprehensive planning and ensures certain areas are not overlooked.

master: written for the client to highlight the material facts of the case with emphases on recommendations.