Series 65

By Investopedia AAA

Analyzing Your Client's Financial Profile - Current Status and Financial Goals


Current Status
Before you can begin to help clients meet their goals, you must have a good grasp of their current financial situation. It can be useful to create worksheets to capture the following information:

  • Income
  • Expenses
  • Assets
  • Liabilities
  • Tax issues

Financial Goals
"Financial goals" refers to general investment objectives, not the client's specific needs, such as retirement at a certain age or college plans for his/her children (see the next section on capital needs).

However, there is certainly a correlation between the two, and it is useful to know the characteristics of each of these investment goals:

  • Preservation of capital - the investor is more concerned with safety than return. Treasury bills and money market funds may be most appropriate.

  • Current income - the investor needs a portfolio that produces steady income for current living expenses. Bonds, annuities and stocks with high dividends (such as utility stocks) may be appropriate.

  • Growth and income - the investor is looking for a portfolio that generates some amount of income, but he/she is looking for capital appreciation as well (often for protection against inflation). Appropriate investments could include a mix of bonds and stocks.

  • Growth - the investor's goal is likely retirement or another event in the future, where current income is not needed. A diversified stock or mutual fund portfolio is appropriate.

  • Speculation - the investor is looking for high-risk investments with a potential for very large returns. This is rarely the goal for an entire portfolio, but rather for a specific portion of assets. Aggressive growth funds and small-cap issues may be most appropriate.


Exam Tips and Tricks
Consider this sample exam question:

  1. Each of the mutual funds below might be suitable for an investor primarily seeking income investments EXCEPT:
    1. Government bond fund
    2. Balanced fund
    3. Sector fund
    4. Money market fund

The correct answer is "c", since sector funds contain only stock investments and are primarily growth-oriented.

Capital and Current Investments

You May Also Like

Related Articles
  1. Stock Analysis

    Merck Up on OncoEthix Acquisition Deal, ...

  2. Stock Analysis

    ALLETE Buys NRG Energy's Storm Lake ...

  3. Stock Analysis

    Starwood Expands in Colombia with Four ...

  4. Stock Analysis

    U.S. Bancorp to Pay $6M to Settle Trustee ...

  5. Stock Analysis

    Wells Fargo Brokerage Units Fined by ...

Trading Center