A financial profile should include an assessment of the client's: correct answers Current expenditures
debt obligations
tax status
income sources
balance sheet containing the client's assets, including:
cash, cds, savings, real estate, value and composition of securities, pension and r...
Series 65 Unit 19 || with Error-free Solutions.
A financial profile should include an assessment of the client's: correct answers Current
expenditures
debt obligations
tax status
income sources
balance sheet containing the client's assets, including:
cash, cds, savings, real estate, value and composition of securities, pension and retirement
accounts, cash value in life insurance policies, personal items such as jewelry and car and
liabilities including current debt (credit card, tax, long term debt, auto, mortgage, loans against
insurance cash value and loans against 401k)
Family balance sheet correct answers Advisor will use this info to prepare a balance sheet of net
worth and liquidity of that client, while the family income statement includes income and
expenses and is used to determine the client's cash flow.
ALERT: Family balance sheet includes assets and liabilities, not income such as salary,
dividends or interest or amounts paid for expenses.
Nonfinancial considerations of client correct answers Age
Marital status
Investment experience
Attitudes and values such as ESG investing
Number and age of dependents
Employment stability
Employment of family members
Demographics (where clients live can affect their investment attitudes)
Current and future family educational needs
Current and future family health care needs
Behavioral finance correct answers Investors can make financial decisions based on irrational
factors:
Overconfidence - people overestimate the availability and accuracy of the information available
to them.
Conservatism - hard time changing their existing believes, even when new information is
presented to them
Herd behavior - a market drop may be followed by panic selling
, Anchoring - the tendency to base expectations on the first information received, which may or
may not be accurate. Once a thought is anchored in your mind, it is difficult to move away from
it.
Regret aversion - investor prepares himself in such a way as to avoid distress over an adverse
outcome
Risk tolerance correct answers An individual investor's ability to accept loss of some or all of the
money they have invested.
Selection of investments should depend on several factors: correct answers Client's objectives
Amount available for investing (client must use discretionary money for investing)
Client's aversion to ris
To understand a client's risk tolerance, an advisor should know the following information:
correct answers How much of a loss can the investor tolerate
The liquidity requirements for investments
Importance of tax considerations
Investment time horizon, either long or short term
Investment experience
Current investment holdings
Expectations regarding investment returns
Investment temperament (client bored with stable investments or anxious with volatile ones)
Level of tolerance for market fluctuations.
Aggressive investors correct answers Willing to risk greater amounts and withstand market
volatility in exchange for the chance to realize substantial returns. May be willing to sustain
losses of 10, 25 or even 50%
Conservative investors correct answers Relative safety of guaranteed income with low risk of
loss of principal. Very conservative investors are unwilling to sustain even modest losses on their
investments.
Sample portfolio based on risk correct answers Conservative:
30% stock
50% bond
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller FullyFocus. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $11.39. You're not tied to anything after your purchase.
