Analyzing Your Client's Financial Profile - Capital and Current Investments


Capital and Other Needs
The client's specific goals should be discussed in detail. While retirement and college funding are nearly universal, be sure to probe for other goals, such as starting a business, helping other family members or buying a vacation home.


A key consideration for any of these goals is the time horizon, which affects both the choice of investment strategy and the amount of annual savings needed to reach the goal. Other needs must be discussed and planned for as well, including:

  • Emergency reserves - while three to six months of living expenses is considered standard, other factors could dictate a larger or smaller need for liquid savings.

  • Life insurance - if the client has a family whose income needs cannot be met through current assets, life insurance is needed. The total amount and type of insurance would depend on client circumstances.

  • Other insurance - the IA should review the client's disability and health insurance coverage, since any investment or estate plans could be disrupted if this coverage is inadequate.

Current Investments
Before making investment recommendations, it's important for the IA to understand the client's current holdings and what strategies were used to create them. The client may wish to liquidate some or all of these holdings and reinvest in a new portfolio, or he/she may want to retain all current holdings. The IA must take these choices into consideration before making recommendations.

Risk Tolerance and Non-Financial Considerations


Related Articles
  1. Professionals

    Capital and Other Needs, Current Investments and Risk Tolerance

    FINRA/NASAA Series 66: Section 3 Capital and Other Needs, Current Investments and Risk Tolerance. This section discusses clients' capital and other needs such as insurance, current investments ...
  2. Professionals

    Suitability Factors

    FINRA Series 6: Section 9 Suitability Factors. In this section Financial Status of Clients, Client Type, Partnerships, Corporations, Current Status, Emergency Insurance, Current Investments, ...
  3. Professionals

    Prudent Investor Standards

    FINRA/NASAA Series 66 - Prudent Investor Standards. This section explains the prudent investor standards.
  4. Professionals

    Prudent Investor Standards

    FINRA/NASAA Series 65 - Prudent Investor Standards. In this section the prudent person rule and sample question.
  5. Professionals

    Other Prohibited Behaviors

    FINRA/NASAA Series 65 - Other Prohibited Behaviors. In this section unethical actions, conflicts of interest, agency cross transactions and insider trading.
  6. Professionals

    Other Prohibited Behaviors

    FINRA/NASAA Series 66 - Other Prohibited Behaviors. This section describes other prohibited behaviour such as misrepresentations, third-party research, improper facts, misleading statements and ...
  7. Your Clients

    Now Is the Time to Check In on Clients' Insurance

    Insurance forms the foundation of many financial plans, and you need to make sure that your clients’ coverage is kept up-to-date.
  8. Your Clients

    When is it Time to Discuss a Client's Life Policy?

    Life insurance is a vital part of financial planning. Here's when and why to talk to clients about it.
  9. Your Clients

    How to Construct an Annual Review for Clients

    One of the best things that advisors can provide to clients is an annual review of their financial situation. Here are some guidelines.
  10. Professionals

    Conflicts of Interest

    FINRA/NASAA Series 65 - Conflicts of Interest. In this section curning, client loans and exceptions to client loans.
RELATED TERMS
  1. Blanket Recommendation

    A situation in which a financial professional or institution ...
  2. Insurance Premium

    The amount of money that an individual or business must pay for ...
  3. Client Base

    A company's primary source of business. A client base consists ...
  4. Insurance Coverage Area

    The geographic region in which an insurance policy’s benefits ...
  5. Accommodation Line

    An addition or change to a standard insurance contract. The change ...
  6. Investment Manager

    A person or organization that makes investments in portfolios ...
RELATED FAQS
  1. Under what circumstances can an IA choose to sell a security for a client without ...

    A. When the transaction is less than $5,000B. When the IA decides only how many shares to sellC. When the client tells the ... Read Answer >>
  2. What are some examples of industries that practice price discrimination?

    Understand the various types of insurance coverage offered in the insurance marketplace, and learn why each policy should ... Read Answer >>
  3. How does an insurance broker make money?

    Discover how an insurance broker makes money. Insurance brokers are important in helping people find the right insurance ... Read Answer >>
  4. Which insurance policies do I really need?

    Your needs for insurance depend on your situation and can't be generalized for everyone, but there are a lot of options available. ... Read Answer >>
  5. What are some examples of when insurance bundling is a bad idea?

    Learn about situations where insurance bundling may not be a favorable option. Bundling insurance is often a good idea, but ... Read Answer >>
  6. What is reinsurance?

    Reinsurance occurs when multiple insurance companies share risk by purchasing insurance policies from other insurers to limit ... Read Answer >>
Hot Definitions
  1. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  5. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  6. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
Trading Center