Fundamentals Lesson 3 Flashcards
External Factors (Opportunities & Threats):
Economic Social Political Legal Technological Taxation
*Think of planning opportunities when these come
Financial Planning Process:
UIADPIM Understand Identify Analyze Develop Present Implement Monitor
Qualitative Data:
Subjective
Health, life expectancy, family circumstances, values, attitudes, expectations, earnings potential, risk tolerance, goals, needs, priorities, current course of action
Quantitative Data:
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
Benchmarks - Risks: Life insurance: Health insurance Disability: Property LTC PLUP
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
Benchmarks - Short Term Savings & Investments:
Emergency fund:
Housing ratios:
Debt analysis:
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)
Benchmarks - Long Term Savings & Investments:
Education funding:
Retirement:
Legacy:
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
Motivational interviewing:
Conveys empathy & acceptance while guiding client to discover their own motivation
Key principles to motivational interviewing:
Partnership (collaborative)
Evocation (draw out reasons)
Acceptance (understand client’s perspective)
Compassion (promote/prioritize welfare & wellbeing in selfless manor)
Psychological Barriers
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
Money Beliefs:
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
Self-Determination Theory:
Intrinsic:
Competence, Relatedness, Autonomy
Framing:
Overcoming inertia:
Context of choice will influence decision
Limit information to focus on what’s relevant for decision
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
C
Lesson 3 Review: Which is correct order? A: Understand, Identify, Engage B. Engage, Understand, Identify C. Understand, Engage, Identify D. Identify, Engage, Understand
B
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
C
Lesson 3 Review:
Which would help auditory learner?
A. Graphs
B. Charts
C. Repeating key information
D. Creating pictorial illustration of cash flow
C
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?
D
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
B
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
B
