Chapter 2 Flashcards
In the ____ process, the advisor tries to uncover the client’s reasons for putting money aside, leading to th client’s emotional buy-in to the accumulation plan.
discovery
What are the 2 important components to the value based approach?
- Focus on the clients values
2. Discovery (the wealth advisor tries to understand the client’s accumulation stage and potential life transitions).
The _____ planning approach is a discovery method that helps builds bond of trust between the advisor and the client.
Value-based planning approach
The ____ planning approach is structured and is conducted systematically and professionally.
Value based
There are 2 kinds of questions that advisors can use to get the information that they are looking for. These are:
- Current state questions
2. Future state questions
List in order Maslow’s Hierarchy of Needs
- Survival
- Safety
- Sense of Belonging
- Self-Esteem
- Self-Actualization
The ____ stage approach is a hybrid of two methods (age-specific method and life stages).
accumulation stage approach
The ____ or ____ Formation Stage is focused on creating stability in their lives. This stage lasts from the early twenties through to the mid-forties. It has accumulation needs:
- Pay for housing
- Put money aside for capital purchases such as appliances and transportation
- Fund lifestyle, such as vacations, clothing and entertainment
- Look after children’s needs, such as clothing, care costs and medical expenses
Life build or Seed Money Formation Stage
The following important longer-term accumulation needs are apart of what stage?
Home purchase Children's education Emergency savings RRSP purchases Non-registered savings Paying off debts such as student loans and credit cards
Life-Build/Seed Money Formation Stage
Individuals start to turn attention to saving for retirement during the ____ stage.
Mid-Life or Pre-Retirement Stage
Name the stage that involves the following accumulation issues:
Topping up funding for children's education. Adding to retirement savings Reducing debt Upgrading home Purchasing vacation home Supporting parents or children
Mid-Life or Pre-retirement Stage
Name 3 popular methods for periodic cash flow
- An itemized list of all expected expenses
- Net income adjusted for Pre-retirement expenses
- An estimated percentages of Pre-retirement income
This method is a three step process that involves:
- Add up the current after-tax income for both spouses
- Add up expenses that may vanish after retirement (such as RRSP, mortgage, lunches, etc)
- Deduct the Pre-retirement expenses from current after-tax income to calculate after-tax income to calculate after-tax living expenses. Estimate the income taxes for this amount of net income. Gross up living expenses to arrive at pre-tax retirement living expenses (RLE).
Net income, adjusted for Pre-retirement expenses
An itemized list of all expected expenses is all called ____
Square One Approach.
This method of predicting cash flow required during retirement takes a percentage of pre-retirement income as an estimate of needs for retirement. It is the easiest but most inaccurate method.
An estimated percentage of pre-retirement income.
____ is the maximum amount of money a client can withdraw from a retirement portfolio on a periodic basis with no probability of depleting these savings during one’s lifetime.
Sustainment Withdrawal Rate (SWR)
Generally the Sustainable Withdrawl Rate (SWR) must be 30% to 50% lower than the ____ Rate.
Average Portfolio Growth (APG) Rate.
The ____ also known as the asset multipler, indicates how much savings are required at the beginning of retirement to finance each dollar of annual Withdrawl for a given time horizon.
Funding Factor
Name the 5 topics on risk questionnaires
- Investment time horizons
- Family considerations
- Financial security
- Financial literacy
- Emotional attitudes toward money
A ____ is the foundation of marketing. It’s the way of conveying to the marketplace the things that an advisor does and the value of the wealth management approach.
Value Proposition
Name 4 network relationships you might consider when developing professional collaborations
Recommendation
Strategic Alliance
Reciprocal Agreement
Business Partnership
Credibility is based on a foundation of these 3 things
- Expertise
- Trustworthiness
- Consistency
A ____ is the foundation of the sales approach an advisor takes,
Mission Statement
3 critical elements of an advisors brand include:
- Clients must understand what needs they have the advisor meets
- Client must have emotional attachment to the advisor’s practice
- Clients must be able to articulate what the advisor does for them
In order to complete the mid-life growth stage, the portfolio value should be how many times the estimated annual post-retirement withdrawals from the portfolio?
20 times
George has a 40 year old client who is 15 years from retirement. She has $150,000 in retirement savings. George has calculated her pre-tax shortfall as $15,000 per year in current dollars. The client wants her money to last until she is 85 years of age. Assuming the following funding factors and inflation at 3%, what is the amount of money the client needs to have at time of retirement?
Post Retirement Time Horizon 10 yrs 20 yrs 30 yrs 40 yrs
Funding Factor 10.2 19.3 26.7 32.5
Amount of money needed at retirement = (Funding Factor at 30)(FV,PV = -15,000, I = 3, N = 15) = (26.7)(23369.51) = $623,966
