Series 7
Determining Customer Objectives - Client Income Statement
A potential client's financial situation should be the first item you consider. The client's income should be adequate to meet his or her needs before any investment program is launched. Once you have established that this is the case, life insurance should be the first investment considered. The payout should typically be seven to 10 times annual salary. Not only does life and disability insurance protect the client's loved ones from hardship in the case of her untimely death or incapacity, it also has a value that can be cashed in after retirement.
At this point, you will need to draw up an individual income statement for your prospective client. Consider the following example:
In this case, the prospective client appears to have about $12,000 to invest after meeting all current expenses - so far, so good.
At this point, you will need to draw up an individual income statement for your prospective client. Consider the following example:
| Individual Income Statement for Year Ended 31 DEC 20xx | ||
| Current Income | ||
| Salary | $100,000 | |
| Bonus | $10,000 | |
| Interest/Dividends | $3,000 | |
| Royalties, other passive income | $1,000 | |
| Total current income | $114,000 | |
| Current Expenses | ||
| Mortgage, property tax, mortgage insurance | $25,000 | |
| Income taxes | $20,000 | |
| Household budget (food, clothes, fuel, etc.) | $18,000 | |
| Employee savings plan/401(k) | $12,000 | |
| Utilities | $10,000 | |
| Auto lease | $6,000 | |
| Life, disability and health insurance | $5,000 | |
| Auto insurance | $3,000 | |
| Charitable Donations | $3,000 | |
| Total current expense | $102,000 | |
| Net Spendable Income Available for Investment | (Total current income minus total current expense) | $12,000 |
In this case, the prospective client appears to have about $12,000 to invest after meeting all current expenses - so far, so good.
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