In this example, we looked at an individual. This is also unrealistic. When developing an investment plan, you must determine if the potential client can support all of her dependents as well as herself.

That means inquiring as to:

  • marital status
  • number of children and other dependents
  • employment of client and client's spouse
  • are children are going to private or public school
  • how much they expect to pay for college and when those college educations begin.

It is also a good idea to ask the investor about her investment experience. In this example, the prospective client has some stocks and mutual funds, but she has more in cash equivalents, CDs and savings bonds. This is probably not a person with whom you need to discuss three-point arbitrage - at least, not immediately. Just talk stocks, bonds and mutual funds with her to start.

Lastly, and most tactfully, you need to ask a prospective client if she has made out her will. This might not affect whether you recommend a stock or a mutual fund to her this week, but it will definitely affect what advice you give her when she reaches the gifting stage.

Investment Objectives

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