Elements of Financial Planning and Behavior Considerations

Question 1

What are the external Environment considerations?

Answer 1

Economic factors, Social, Political, legal, technological, taxation

Question 2

Describe the practice standard Understanding Clients personal and Financial circumstance

Answer 2

• qualitative and quantitative data needed from client to fulfill scope
• analyze that information to understand personal and financial goals
• if not given complete info then limit the scope or terminate relationship.

Question 3

Describe the practice standard of Identifying and Selecting Goals

Answer 3

• Discuss and apply reasonable assumption
• prioritize goals and discuss effects of selection

Question 4

Describe the Practice standard Analyze

Answer 4

• advantages and disadvantages of current course

Question 5

Describe the practice standard of implementation

Answer 5

• establish responsibilities of client and planner or any 3rd party. Analyze implementation process

Question 6

Describe the Monitor and Updating practice standard

Answer 6

• establish monitor and updating responsibilities
• communicate how/when monitoring or updating may occur
• client must inform of material changes

Question 7

What is the 3 panel approach

Answer 7

helps identify weaknesses and strength based on benchmarks

Question 8

Benchmark of Life Insurance is..

Answer 8

10-16 x Gross Income

Question 9

Benchmark of Health Insurance…

Answer 9

minimum of 1M per lifetime

Question 10

Benchmark of Disability

Answer 10

if after tax, then 60-70% if gross income

Question 11

Benchmark of property

Answer 11

Covers home and auto at FMV

Question 12

Benchmark of LTC

Answer 12

policy providing daily benefit for nursing home care, home care or help with activities of daily living, with inflation protection

Question 13

Benchmark of Personal Liability Umbrella

Answer 13

PLUP 1-3M liability protection

Question 14

Benchmark of Emergency Fund

Answer 14

3-6 Month

Question 15

Benchmark of Housing Ratio

Answer 15

primary mortgage should not exceed 28% of gross income

Question 16

Benchmark of Housing ratio plus other debt

Answer 16

should not exceed 36% gross income

Question 17

Benchmark of Education Funding

Answer 17

3k/year - public, 6k/year - semiprivate, 9k/year - private

Question 18

Benchmark of retirement amount

Answer 18

at age 62-65 should have 16x amount needed saved. Individual needs 100k/yr

Question 19

Benchmark of Savings Rate

Answer 19

10-12%

Question 20

Benchmark of return on investments

Answer 20

8-10%

Question 21

Benchmark of risk taken

Answer 21

measured in SD. SD should be 8-14%

Question 22

What are the Big three Legacy Docs

Answer 22

Will, Durable POA, Advanced Medical Directive

Question 23

What are the stages of Client Psychology and traits?

Answer 23

Stage 1: Precontemplation- No intent to change or in denial
Stage 2: Contemplation- aware of change needed but not yet to take action
Stage 3: Preparation- gathering info
stage 4: Action- bad habits transitioned to healthier
Stage 5: Maintenance - prevention of relapse

Question 24

What are the types of money beliefs and traits and effects

Answer 24

1. Money Avoidance
   -tries to not think of money or believe they don’t deserve it.
   - likely suffer from financial denial and unlikely to stick to a budget
2. Money worship
   - buys things to create happiness
   - often has lower net worth and higher cc debt, likely to suffer from workaholicism