Unit 1 The Personal Financial Planning Process Flashcards
The Financial Planning Process allows…
a client to get a realistic overview of his current financial status, set and analyze goals, develop a plan to meet those goals, and follow the plan to accomplish his goals.
When does a financial planning engagement exists?
when a CFP performs any type of mutually agreed-upon financial planning services for a client.
Who is a financial planning practitioner?
is a person who engages in financial planning using the financial planning process when working with a client.
What are the 6 steps of the financial planning process?
- Establishing and Defining the Client planner relationship.
- Gather Information from the client.
- Analyzing and Evaluation the client’s current Financial status.
- Develop and Communicate the Recommendations.
- Implementing the Recommendations.
- Monitor the Recommendations.
What is the letter of engagement?
Defines the legal relationship between the planner and client.
What is Qualitative Data?
subjective data…concerned with a clients quality of life, health status or risk tolerance.
What is Quantitative Data?
Objective data…are measurable or conveyed as a quantity…financial statements or list of current assets.
A sound Financial plan should be customized with a recommendations based on…
clients needs, objectives, time horizons, risk tolerance, and goals.
What are the 3 phases of a clients life cycle?
- Asset accumulation phase - up until age 45 or later if children are still dependent.
- Conservation or protection phase - 45 - 60 or immediately proceeding retirement.
- Distribution or gifting phase - after retirement
remember the lines do blur here
Risk Tolerance
involves the tradeoffs clients are willing to make between potential risks and rewards.
Risk Perceptions
is the clients’ assessment of the magnitude of risks being traded off.
Risk Capacity
is the degree to which a clients financial resources can cushion risks.
What are the 3 major types of learning styles?
Visual, Auditory, Kinesthetic
What is the formula for Net Worth?
Assets - Liabilities = Net Worth
or Liabilities + Net Worth = Assets
Assets
cash or cash equivalents, investments, and personal use assets.