Chapter 3 Flashcards
Firms must report any large cash or otherwise suspicious client transactions to
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
The primary form used to collect client information is the
account application
This financial information gives you a clear picture of the client’s situation and provides valuable
insight into whether their goals are achievable.
Net Worth and Cash Flow Statements
______ are a client’s life needs and aspirations. For example, a 33-year-old client would like to buy a four bedroom house in the next three years and retire at age 63.
Goals
__________ refer to the investment return the client requires and the risk he must tolerate to achieve his goals
Objectives
Any actions that help the client achieve his desired return are considered ___________
Objectives
The ________objective is a measure of how much the client’s portfolio is expected to earn each year on average.
return
The _________objective is a measure of the portfolio’s expected annual total return
Return
A client’s ________ _________ is an estimate of the average annual return needed to meet his or her goals.
required return
Client’s willingness to accept risk is called:
Risk Tolerance
Client’s ability to endure potential financial loss
Risk Capacity
Risk tolerance and risk capacity are separate considerations that together make up the client’s overall risk _______
profile
The risk profile for a client should reflect the ________of their willingness to accept risk and the their ability to endure potential financial loss
lower (lesser)
What is home bias?
Some clients/ investors favor investments inside Canada because it is familiar to them.
Once you and your client have determined the appropriate risk profile, you must explicitly state the
risk objective
You will need this information to recommend an appropriate asset allocation for the client.
Risk profile & Risk objective
Common investment constraints include:
Time horizon, liquidity requirements, and tax situation
A short-term time horizon is less than ______ years
3
A medium-term time horizon is more than ______ years, but less than ______
3 years but less than 10 years
A long-term time horizon is _____ years or more
10
__________ requirements represent a client’s actual and potential cash needs.
Liquidity
When you understand everything about the client’s tax situation, you can suggest or implement techniques to reduce the amount of tax the client must pay. This aspect of wealth management is known as
Tax Management
How far back can you carry capital losses? How far forward?
Capital losses not used to offset capital gains in the current year can be applied against capital gains from the previous 3 years.
They can also be carried forward indefinitely to offset capital gains in future years.
The methods used to collect and document all the information you need to create a comprehensive wealth plan is often called the
client discovery process
