Chapter 1 - Managing the Financial Planning Process Flashcards
How does an advisor engage with clients in a product driven role?
Engages with clients to sell products, with each encounter focused on a single transaction. A product driven advisor provides what the client requests or else focuses on selling specific products that the client may or may not need.
How does an advisor engage with clients in a client driven role?
The focus is on relationship building, where the advisor’s focus is not on selling products but on building relationships with clients, matching products and services to their needs and referring them to business partners where necessary.
How has the old reactive model of financial services evolved?
Previously, advisors took on a more reactive approach by responding to clients’ needs by doing only what was asked or selling as many products as possible, regardless of need. The new model is a proactive approach where the advisor is better able to assist clients in defining their needs and assessing which financial products and services would be most appropriate.
What is the full service offer?
This is a level of service advisors provide to their clients that takes into consideration all client’s needs as the advisor develops an integrated strategy to help them achieve their goals.
What are the steps in the process of providing full service?
- Assess your client’s financial situation
- Define and prioritize goals
- Adjust the strategy based on financial capacity
- Identify financial product and service options
- Conduct a periodic review
What should be done when conducting a periodic review?
Review your clients’ financial situations to measure progress at least every year. Identify discrepancies between the initial strategy and its results, identify the reasons for the discrepancies, and recommend changes based on the results.
What are the steps in the financial planning process?
- Establish the client/advisor relationship
- Collect data and information
- Analyze data and information
- Recommend strategies to meet goals
- Implement recommendations
- Conduct a periodic review or follow-up
What are the results of an efficient financial plan and of an effective financial plan?
An efficient plan produces the best results for the least money, an effective plan delivers desired results.
How should you formalize a relationship following a successful initial interview?
With a letter of engagement or professional service contract.
What are the 5 primary responsibilities an advisor has to their client?
- Integrity
- Professionalism
- Confidentiality
- Objectivity
- Diligence
What is qualitative financial data?
Any information that helps you assess your clients’ understanding of economic concepts and to determine their tolerance for risk.
What are the 4 characteristics of financial goals?
- Specific and measurable
- Ordered in level of importance
- Defined by a time frame
- Acceptable in level of risk
What is implicit data?
Qualitative information that has to be determined by the advisor, rather than gathered directly from the client. Must be inferred by asking the right questions.
What are an advisor’s duties when analyzing clients’ data?
- Identify gaps between the current financial situation and stated objectives
- Identify potential problems that could adversely affect your clients’ financial plan in the future
- If necessary, modify the stated objectives or the priority of these objectives
- Evaluate current and forecasted economic conditions and incorporate them into the analysis
- Carry out the analysis in strict accordance with legal and ethical requirements
What are the steps in the recommendation stage?
- Discuss strategies and recommendations with your clients
- Allow your clients to ask questions and express concerns
- Modify and revise your recommendations accordingly
- Discuss the new recommendations with your clients
