Series 65 Vocabulary
Insured Deposits Correct Answer-Deposits that are held as cash in a bank or credit
union that are insured against loss by another company
Demand Deposit Correct Answer-Deposits from checking and savings accounts
which can be demanded at any time without advanced notice
Certificate of Deposit (CD) Correct Answer-Savings certificate promising the
holder of the CD a specific rate of interest
Money Market Instruments Correct Answer-Short maturity debts issued by
governments, large companies, and financial institutions
Commercial Paper Correct Answer-Money market instrument characterized by a
short duration and an unsecured nature
Individual Correct Answer-A singular person that invests for him or herself
Sole Proprietorship Correct Answer-A business that is formed by the owner and
not structured as a limited liability corporation, but a sole proprietorship, may
report it's income and losses on the individual owner's income tax returns.
General Partnership Correct Answer-Business venture in which two partners or
more accept liability for debts accepted by the business, personal assets are at stake
Limited Partnership Correct Answer-Business venture in which general partners
manage the business and assume liability for the company's debt, but the partners
are only liable for up to the amount of their investment
,Limited Liability Company (LLC) Correct Answer-Business venture in which the
owners are limited in their liability regarding the company's debt, non taxable
entity
C-Corporation Correct Answer-Business structure by which the company itself is
made into a legal person and assumes all legal and financial liabilities, revenues
are taxed to the corporation
S-Corporation Correct Answer-Business structure in which the company itself is
made into a legal person and assumes all legal and financial liabilities, no more
than 100 investors can be involved, revenues are passed on to the investors and not
taxed at the corporate level
Trust Correct Answer-Legal arrangements by which investors may protect their
assets, trustee is assigned to carry out the deceased's wishes in accordance with
trust documents and make the passing of wealth and assets an easier transition
Estate Correct Answer-The property left behind by a deceased person, the
deceased need to leave behind details or it will go to a probate court where the
decedent's assets and heirs will lose value and money respectively
Determining A Client's Financial Goals Correct Answer-All objectives are
essential to consider. These objectives may have a long time horizon, such as
retirement, or a shorter time horizon, such as saving for a child's education.
Client's Time Horizon Correct Answer-Period of time in which the assets are to be
invested. Knowing he time horizon is essential for providing suitable investment
advice. Shorter time horizon warrants more conservative investments while a
longer time horizon warrants more aggressive investments.
,Client's Risk Tolerance Correct Answer-Many factors are important to be
considered, time horizon is one of the more important considerations. Investor
personality is also a factor in the risk tolerance.
Client's Investment Profile Correct Answer-A multifaceted look at the client's
current situation and goals. Factors the advisor must be aware of: current income,
goals regarding investment, plans regarding their eventual death, possible
disability, time horizon, risk tolerance, cash flows, balance sheet of assets, existing
investments, tax situation, values, attitude, experience, level of sophistication, and
demographics.
Client's Income Needs Correct Answer-Current income and the need for current
income, if needs are being met by current occupation.
Retirement Correct Answer-When determining how to invest retirement funds, the
advisor needs to know the time horizon, the length of time the investor needs the
money, how to ensure it will last the length of the entire time horizon. Also
important to know whether the client desires a high level spending in retirement or
to maintain their current spending in retirement. High level of spending=aggressive
investment while current level of spending=conservative investment.
Eventual Demise Correct Answer-Clients can prepare for eventual demise by
purchasing life insurance and participating in estate planning, and possibility
setting up a trust. Life insurance policies can help beneficiaries cope with the loss
of income caused by the death. Estate planning helps ensure that the deceased's
wishes are fulfilled with minimal loss of assets due to taxation and legal fees.
Disability Correct Answer-Many investors experience disability at some point in
their life, this can involve loss of income, which can endanger assets that guarantee
financial liabilities. Disability insurance is a policy that helps the insured cope with
, the loss of income resulting from disability by providing payments to the injured
party, usually for a specific period of time.
Cash Flow Correct Answer-The clients need for cash should be regularly discussed
to ensure current needs are being met and future needs will be met. Ensuring
present and future cash flows should be considered with every decision the client
makes as it is part of the fiduciary responsibility of the advisor.
Investing Needs Correct Answer-The client's balance sheet is a summary of the
client's net worth as related to their assets and liabilities. The advisor can use to
balance sheet to determine the solvency of the investor and make a suitable
judgment as to their needs involving investing and financial planning. Sheet can
also be used to show why the advisor gives certain financial advice to the client.
Existing Investments Correct Answer-The advisor needs to be aware of the
investor's current holdings. This helps to make more informed advice and
decisions, while also ensuring that the investor is receiving all the benefits that the
current holding has to offer.
Tax Situation Correct Answer-Every client has a different tax situation. Knowing
the specific situation is vital. It's important to know which types of investments are
tax advantaged and which are not. It is also essential to know the client's adjusted
gross income and their respective tax brackets. If the client is at the edge of a
bracket, money can be rearranged to pay the smallest fee possible.
Investment Advice Correct Answer-Advice is dependent on what the investor
seeks from investing: maximum return on outlay of capital, or only investing in
moral markets and companies. Also the investor's background: investing
experience, sophistication, and the investor's attitude toward current world events
and political environments.
