The Financial Planning Process Flashcards
An individual (can also be called an agent) who has passed the appropriate regulatory exams and is authorized to sell securities to clients and charge a commission
Broker
A firm in the business of buying and selling securities, operating as both _________, depending upon the transaction. A firm acts as a _____ when it executes orders on behalf of clients, and acts as a _____ when it
trades for its own account.
Broker - Dealer
A written set of rules and expectations that embodies principles for behavior, a list of standards for professional conduct, and a set of disciplinary
procedures.
Code of Ethics
When a planner or adviser receives compensation directly tied to a client buying or selling a particular product
Commissions
A financial plan that covers just about all of a person’s financial objectives, including consideration of risk management, investment planning, tax planning, retirement planning, and estate planning.
Comprehensive financial plan
Occurs when the planner has choices that benefit them more than the client, or may get in the way of providing the most objective advice for the client. For example, there may be two products, both of which would be helpful for the client, but the planner would receive a higher commission on one versus the other. Conflicts of interest will always exist; the
important thing is for the planner to disclose them to clients
Conflict of interest.
A questionnaire used by financial planners to gather
information, both quantitative and qualitative, from clients.
Data survey form
Financial planners who charge both a fee and can receive commissions.
Fee-based Planning
Financial planners who charge a fee for their services and do not receive any commissions. Examples include charging an asset under management (AUM) fee, or a retainer fee, or an hourly fee.
Fee-only planning
Always acting in the best interests of the client
Fiduciary standard
A relationship between two parties in which one has a high duty to act in utmost good faith and look out for the best interests of the other.
Fiduciary relationship
A written statement, clearly defined and quantified, that identifies the financial purpose to be achieved. Goals should be clear as to purpose, time frame, and amount (“PTA”)
Financial Goal
The development and implementation of total, coordinated plans designed to achieve an individual’s financial objectives.
Financial Planning
Consists of seven steps: understanding the client’s personal and financial circumstances; identifying and selecting goals; analyzing the client’s current course of action and potential alternate course(s) of action; developing the financial planning
recommendations; presenting the financial planning recommendations;implementing the financial planning recommendations; and monitoring progress and updating.
Financial Planning Process
Which regulates brokers and broker-dealers.
FINRA Financial Industry Regulatory Authority
The regulatory form that all registered investment advisers (RIAs) must file with the SEC and provide to each and every client
Form ADV Part 2
Pertains to the financial planning process. ______ are what the person wishes to accomplish as a result of planning (often used interchangeably
with goals).
Objectives
The process of determining whether and how an individual can meet life goals through the proper management of financial resources.
Personal Financial Planning
The principle that requires attaining, maintaining, and applying a sufficient level of knowledge and skill in servicing the client.
Principle of competence
The principle that requires not disclosing “any confidential client information without the specific consent of the client unless in response to proper legal process.”
Principle of confidentiality
The principle that “demands honesty and candor which must not be subordinated to personal gain and advantage.”
Principle of integrity
The principle that requires the application of intellectual honesty and impartiality.
Principle of objectivity.
The principle that requires the conduct of a
financial planner to reflect credit upon the profession.
Principle of professionalism
Investment advisers who provide advice on investments to clients, and must register with either the SEC or with the states, depending assets they have under management.
Registered investment adviser (RIA)
A federal regulatory agency established under the Securities Exchange Act of 1934. It mission is to protect investors, maintain fair, orderly, and efficient markets, and to facilitate capital formation.
Securities and Exchange Commission (SEC)
A lesser standard than the fiduciary standard that requires an investment be “_____” for a client. This is not as strong a standard as the fiduciary standard, which requires that any advice given always be in the best interest of the client. An investment may be suitable, but not in the best interest of the client
“Suitable investment” standard
A financial plan that looks at just one objective, such as funding a college education, buying a first home, caring for an elderly parent or handicapped child, or planning for retirement
Targeted financial planning
