Section 101 Unit 1-2 Flashcards
Comprehensive financial plan consists of six main components…
- Savings, budgeting, emergency funding, and education funding.
- Investment Planning
- Insurance Planning
- Income Tax Planning
- Retirement Planning
- Estate Planning
Quantitative Data
Are those data that are measurable or conveyed as quantity. Examples is a current financial status (assets and liabilities), copies of wills, and trusts, and a list of current investments.
Qualitative Data
Are those data that are concerned with the quality of a client’s life. Examples include financial goals and objectives, health status, and client’s risk tolerance level.
Client’s Financial Cycle
Asset Accumulation Stage
Conservation or Protection Stage
Distribution or Gifting Stage
Financial Planning Process
Step 1 Establishing and Defining the client-planner relationship
Step 2 Gathering Information Necessary to Fulfill the Engagement
Step 3 Analyzing and Evaluating the Client’s Current Financial Status
Step 4 Developing and Communicating the Recommendations
Step 5 Implementing the Recommendations
Step 6 Monitoring the Recommendations
Financial Planning Engagement
Exists when a certificate performs any type of mutually agreed-upon financial planning service for a client
Financial Planning Practitioner
Is a person who engages in financial planning using the financial planning process when working with clients
Open-Ended Questions
Conversation provoking questions
Closed-Ended Questions
Require Yes or No answers
Interpersonal Communication
Communicating one-on-one
Emotional Intelligence
The ability to recognize emotional expressions in oneself and the client, as well as selecting socially appropriate responses to both the circumstances and the client’s emotions
Active Listening
Paying full attention
Leading Responses
Guide the client to give more detail, making a “meeting of the minds” more likely.
Asset Accumulation Stage
A client is sully in this stage until approximately age 45 or later if the client’s children are not yet independent
Conservation or Protection Stage
A client is usually in this stage from approximately age 45 to 60 or immediately preceding the client’s planned date of retirement
Distribution or Gifting Stage
A client is usually in this stage from approximately age 60, or planned date of retirement, until date of death. Distribution strategies, including retirement income sources and fitting strategies, are often a primary focus of a client’s estate planning.
Statement of Financial Position
A personal balance sheet or net worth statement. Provides a snapshot of the client’s net worth on any given date, usually at the end of a calendar year. (Like a picture has been taken of that particular moment in time)
Net Worth Equation
Assists - Liabilities = Net Worth
or
Assets = Liabilities + Net Worth
Fair Market Value
Defined by the IRS as the price of property will bring when offered for sale by a willing seller to a willing buyer.
Liabilities are always presented as…
Their principal value without regard to any interest obligation
Statement of Financial Position is organized into three categories
Total Assets (what the client owns) Total Liabilities (what the client owes) Net Worth (what the client is worth after all liabilities are paid in full)
Statement of Financial Position
Total Assets Subcategories
Cash or Cash Equivalent
Investments
Personal Use Assets
Cash and Cash Equivalents
Tend to be current, or short term, in nature.
Investments
Tend to be longer term in nature
