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. 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.
  2. Financial Advisors

    Tips for Helping Clients with Life Insurance Needs

    Life insurance needs will likely change over the client’s lifetime and again financial advisers can provide an objective sounding board.
  3. 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.
  4. 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.
  5. Financial Advisors

    The Top Insurance Needs of Retirees

    While health insurance is the primary insurance need for retirees, there are other types advisors need to consider for their retired clients.
  6. Financial Advisors

    How to Handle Your First Meeting with a Client

    Here's what financial advisors should do in an initial client meeting to start off on the right foot.
  7. Professionals

    Manage Your Clients' Expectations

    You can't control how they react to the market, but you can help them understand the reality of the situation.
  8. Your Clients

    Market Sagging? How to Keep Retirement on Track

    Crafting a realistic retirement plan capable of weathering a volatile market for clients can be tough. Here are some tips on how best to do it.
  9. Professionals

    Advisors: How To Help Young Clients Plan For The Future

    Making high-risk investments isn't always the best course. Learn what other factors advisors should consider.
  10. Retirement

    The Smart Way To Use Life Insurance For Retirement

    Here's how to incorporate life insurance into a plan to ensure that you and your family have the smoothest possible transition into retirement.
RELATED TERMS
  1. Insurance Industry ETF

    A sector-following fund that invests primarily in insurance companies, ...
  2. Insurance Premium

    The amount of money that an individual or business must pay for ...
  3. Universal Life Insurance

    A type of flexible permanent life insurance offering the low-cost ...
  4. Key Person Insurance

    A life insurance policy that a company purchases on a key executive's ...
  5. Personal Lines Insurance

    Property and casualty insurance products for individuals that ...
  6. Insurance Coverage Area

    The geographic region in which an insurance policy’s benefits ...
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. 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 >>
  5. Who are the best-rated life insurance companies in the US?

    Learn about what makes an insurance company the best. Read about the best life insurance companies in the U.S. in 2014, following ... Read Answer >>
  6. What is the average return on total revenue for the insurance sector?

    Learn about the three main segments of the insurance industry, and find out what the average return on revenues is for the ... Read Answer >>
Hot Definitions
  1. Physical Capital

    Physical capital is one of the three main factors of production in economic theory. It consists of manmade goods that assist ...
  2. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  3. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  4. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  5. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  6. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
Trading Center