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
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