Investors' Needs Flashcards
What are the three main factors that are important determinants of each investor’s needs and objectives:
- Time horizon
- Return required
- Risk tolerance
What is often associated with a longer time horizon in terms of investing?
o Generally, the longer the investment horizon, the less need there is for liquidity and more risk can be taken
What is the link between time horizon and return required?
the longer the time horizon, the lower the return required to meet the investment goal
How is risk related to potential return
Related to potential return in a positive way.
What additionally aside from time/ return / risk needs to be considered when taking a investors needs into account
- Liquidity
- Tax considerations
- Regulators requirements/ protection
When establishing a client’s objectives what should be specified regarding a goal
How much is needed, specified in financial terms
and when it is needed
What should be considered if budgetary constraints exist?
If budgetary constraints exist, financial planning should prioritise client’s objectives
What ‘equation’ is used for establishing affordability
Income – Expenditure = Surplus (=investable funds)
What is it called when information is found out about a client?
A fact find
What are examples of Personal information that may be gathered by individuals?
o Full name o Address o Date of birth o State of health o Marital status o Dependents o Residency and domicile o Employment status
What are examples of Financial information that may be gathered by individuals?
o Income o Savings o Investments o Pensions o Liabilities o Investment objectives
What letter may be used when authorising relevant third parties to release information?
Letters of authority
Would soft facts also be used when speaking to a client?
Yes might be used
Open questions e.g. How do you feel about your spread of investments? About taking on more risk?
