Q3A - Problem Set 3 - Solutions 1. Financial planning can...

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Problem Set 3 - Solutions 1. Financial planning can be considered to be made up of four main phases, or stages. What are these? Give a brief outline of each one. The four major phases or stages of financial planning are: 1. Wealth creation (debt reduction, investment, saving, building up super 2. Asset protection (custody of assets, insurance of assets, including salary protection) 3. Retirement planning (accumulation phase, transition-to-retirement, pension phase) 4. Estate planning (retention and disposal of assets, business succession) 2. Discuss the “Know your client” rule. What does this mean in practice? The “Know your client” rule requires planners to provide plans for clients based on detailed information provided by clients, designed to meet client objectives, taking into account the client’s financial circumstances, risk preferences, investment preferences and other relevant information agreed with the client . To do so, FPs need to speak to clients, spend time with them, interview clients, get them to complete a questionnaire and risk profile, and check these with the client. 3. Discuss the “Know your product” rule. What does this mean in practice? The “Know your product” rule requires advisers to be competent in the advice they give. For instance if an adviser recommends investment in an index portfolio, the adviser must be able to provide the client with information about the fund, the fund manager, fund performance and reasonable fund earning projections (usually via a
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Q3A - Problem Set 3 - Solutions 1. Financial planning can...

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