Unit 4 - Session 15 - Client Profile

Question 1

Examples of relevant non-financial consideration

Answer 1

Age, Marital status, investment experience, attitude and values, number and age of dependents, employment stability, employment of family members, demographics, current and future family educational needs, current and future family healthcare needs

Question 2

selection of specific types of investments is dependent on what factors

Answer 2

1. ) Client’s Objectives
2. ) Amount available for investing
3. ) Client’s aversion to risk

Question 3

to assess risk tolerance, what should an adviser know?

Answer 3

1. ) How much of a loss the investor can tolerate (5%, 50%, 100%)
2. ) Liquidity requirements for investments
3. ) Importance of tax considerations
4. ) investment time horizon, either long or short term
5. ) investment experience
6. ) Current investment holdings
7. ) expectations regarding investment returns
8. ) investment temperament
9. ) level of tolerance for market fluctuations

Question 4

First product used when needing capital preservation

Answer 4

Bank CDs

Question 5

Current Income Investments

Answer 5

1. ) government bonds, agency bonds, and notes
2. ) corporate bonds and notes
3. ) preferred stock
4. ) utility company stock

Question 6

Growth Invesments

Answer 6

Stocks

Question 7

Speculation investments

Answer 7

1. ) high volatile stocks
2. ) high-yield (junk) bonds
3. ) options on stocks or stock indexes
4. ) commodity futures

Question 8

College Tuition

Answer 8

1. ) Zero Coupon Bonds
2. ) Coverdell ESAs
3. ) 529 Plans

Question 9

Retirement

Answer 9

1. ) Social Security
2. ) Company Pensions
3. ) Retirement Savings - The sooner investors begin investing the easier they can absorb additional risk in the portfolio, generally through equities
4. ) Insurance

Question 10

Capital Needs Analysis

Answer 10

Used to determine how much life insurance is necessary to meet future needs. Life insurance should cover:

1. ) payoff of client’s mortgage and other debts
2. ) income for the survivor for a reasonable time
3. ) college tuition
4. ) estate taxes if the taxable estate will exceed $5.45MM in ‘16

Question 11

Disability Income replacement

Answer 11

1. ) Worker’s Compensation
2. ) Social Security - to qualify you must not be able to engage in any substantial gainful activity (SGA) b/c of medically-determined physical or mental impairment
3. ) Disability Insurance

Question 12

Tax Planning - Asset & Income Shifting

Answer 12

Shifting investment assets and income to a person in a lower tax bracket. Such as a baby boomer who takes care of their parents, leaving little tax liability from a parent that does not produce income

Question 13

Tax Planning - Tax Defferal

Answer 13

Contributions to a qualified retirement plan or tax-sheltered annuity are not taxed until withdrawn. Investing in funds that have not been taxed allows a substantially larger portion of the investor’s money to earn income or capital gains also not taxed until withdrawn

Question 14

Tax Planning - Tax Free Income

Answer 14

Municipal bonds pay interest that is free from federal taxation, although may be subject state and local taxation depending on the investor’s residence. Income distributions are tax free, capital gains may apply. Other products include 529 plans, Roth IRAs, Coverdell ESAs.

Question 15

Capital Gains

Answer 15

Occurs when an investment is sold for a price that is greater than the investor’s cost basis