Fundamentals Lesson 3

Question 1

External Factors (Opportunities & Threats):

Answer 1

Economic
Social
Political
Legal
Technological
Taxation

*Think of planning opportunities when these come

Question 2

Financial Planning Process:

Answer 2

UIADPIM
Understand
Identify
Analyze
Develop
Present
Implement 
Monitor

Question 3

Qualitative Data:

Answer 3

Subjective
Health, life expectancy, family circumstances, values, attitudes, expectations, earnings potential, risk tolerance, goals, needs, priorities, current course of action

Question 4

Quantitative Data:

Answer 4

Objective
Age, dependents, other professional advisors, income/expenses, cash flow, savings, assets/liabilities, available resources, liquidity, taxes, employee benefits, government benefits, insurance, estate plans, investment accounts, employee benefits, capacity for risk

Question 5

Benchmarks - Risks: 
Life insurance: 
Health insurance
Disability:
Property
LTC
PLUP

Answer 5

Life insurance: 10-16 x gross pay
Disability: 60-70% gross pay
Property: Home & Auto <= FMV
LTC: Inflation protected 36-60 months
PLUP: $1-3M

Question 6

Benchmarks - Short Term Savings & Investments:
Emergency fund:
Housing ratios:
Debt analysis:

Answer 6

Emergency: 3-6 months (current assets/monthly non-discretionary cash flows)
Housing: 28% (PITI/monthly gross income) / 36% (PITI+recurring debt payments/monthly gross income)
Debt analysis: Good-useful life exceed term of debt (15 year mortgage,3 year vehicle) / Reasonable (30 year mortgage,5 year vehicle) / Bad (credit card)

Question 7

Benchmarks - Long Term Savings & Investments:
Education funding:
Retirement:
Legacy:

Answer 7

Education: $3,000 public/ $6,000 semi-private/ $9,000 private
Retirement: 16x amount of income needed annually, 10-12% savings rate, 8-10% return on investments, standard deviation 8-14%
Legacy: Will, DPOA for Healthcare, Advanced Medical Directive

Question 8

Motivational interviewing:

Answer 8

Conveys empathy & acceptance while guiding client to discover their own motivation

Question 9

Key principles to motivational interviewing:

Answer 9

Partnership (collaborative)
Evocation (draw out reasons)
Acceptance (understand client’s perspective)
Compassion (promote/prioritize welfare & wellbeing in selfless manor)

Question 10

Psychological Barriers

Answer 10

1: Pre-Contemplation: no intent to change: unaware or in denial that change is needed
2. Contemplation: aware change is needed & considering but not ready for action
3. Preparation: gathering information to make a change
4. Action: implement the plan
5. Maintenance: prevention of relapse

Question 11

Money Beliefs:

Answer 11

Avoidance: don’t think about/think they don’t deserve; unlikely to follow through; suffer denial/enabling
Worship: buy things to create happiness; lower net worth/high credit card debt; suffer workaholism
Status: keep up successful appearance; likely overspend; suffer gambling/dependence/infidelity
Vigilance: alert & watchful & May have anxiety about financial future; often good outcomes; suffer loss aversion/underspending

Question 12

Self-Determination Theory:

Answer 12

Intrinsic:

Competence, Relatedness, Autonomy

Question 13

Framing:

Overcoming inertia:

Answer 13

Context of choice will influence decision

Limit information to focus on what’s relevant for decision

Question 14

Lesson 3 Review:
Step 1 of financial planning process. What should be collected as part of the qualitative information gathering?

A. Income
B. Assets
C. Life expectancy
D. Estate plan

Answer 14

C

Question 15

Lesson 3 Review: 
Which is correct order? 
A: Understand, Identify, Engage
B. Engage, Understand, Identify
C. Understand, Engage, Identify
D. Identify, Engage, Understand

Answer 15

B

Question 16

Lesson 3 Review:
Which is not one of the Big 3 legacy planning documents a client should have?

A. Will
B. DPOA for Healthcare
C. Revocable Trust
D. Advanced Medical Directive

Answer 16

C

Question 17

Lesson 3 Review:
Which would help auditory learner?

A. Graphs
B. Charts
C. Repeating key information
D. Creating pictorial illustration of cash flow

Answer 17

C

Question 18

Lesson 3 Review:
Which is the type of question used to provide guided imagery?

A. What is your retirement goal?
B. Is this account earmarked for anything?
C. What are your financial goals?
D. If you had all the time & resources you needed, what would you do?

Answer 18

D

Question 19

Which leads you to believe client is open to hearing what planner is saying & engaged in process?

A. Client is leaning back in chair looking at wall behind planner
B. Client is leaning forward in chair looking at diagrams planner is referencing
C. Client keeps adjusting in chair & avoiding eye contact
D. Client keeps adjusting in chair with arms crossed

Answer 19

B

Question 20

Lesson 3 Review: 
Which are important in nonverbal communication & behavior? 
1. Body positioning
2. Body movement
3. Voice tone
4. Voice pitch

A. 1&4
B. 1&2
C. 2&4
D. 2&3

Answer 20

B