FPSCh1 - 2010 Reed International Books Australia Pty...

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© 2011 LexisNexis Australia 1 Financial Planning in Australia 4ed – by Taylor, Juchau, Houterman Solutions by Sharon Taylor CHAPTER 1 THE FINANCIAL PLANNING ENVIRONMENT Solutions to Questions Question 1: Discuss the four phases of the business cycle and how they impact on the role of the financial adviser. 1. Recovery — expansion period — unemployment decreasing, interest rate declining, economic growth, upward movement. 2. Boom — peak period — low unemployment, low interest rates. High economic growth, normally buoyant property market. 3. Contraction — downswing — unemployment rates begin to increase, interest rates rise. 4. Recession — trough or depression — high unemployment, high interest rates. Negative economic growth for more than two successive periods. Discuss the following issues: Depending on where in the cycle we are will affect the types of investments to be recommended. Additionally, the adviser needs to be aware of the effect of the business cycle on an individual’s circumstances, such as high interest rates, therefore lower disposable income; instability in employment, hence possible redundancy; higher cost of living etc. Question 2: Why is it important for financial advisers to be aware of economic parameters in their dealings with clients? Give examples. A discussion should include the adviser being aware of the impact of economic variables such as: interest rates; inflation; unemployment; government policy; global economy. All these factors impact on investment portfolios and, ultimately, the risk tolerance of the client. © 2011 Reed International Books Australia Pty Limited trading as LexisNexis. Permission to download and make copies for classroom use is granted. Reproducing or distributing any material from this website for any other purpose requires written permission from the Publisher. © 2010 Reed International Books Australia Pty Limited trading as LexisNexis. Ancillary for Financial Planning in Sustralia 4ed - Taylor, Juchau, Houterman
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© 2011 LexisNexis Australia 2 Question 3: Define the term ‘financial planning’ and discuss how it differs from other disciplines, such as accounting and law. Financial planning is a holistic process of understanding the goals and objectives of the client and making recommendations as to how these goals might be achieved. It includes the personal, financial and psychological goals of the client in both the short, medium and long term. Other disciplines concentrate on only one or two aspects of clients’ needs, not taking into account all aspects of a client’s situation. In this sense financial planning has a far broader scope in meeting the client’s needs. Question 4:
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This note was uploaded on 04/02/2012 for the course FINS 2643 taught by Professor Fong during the Three '10 term at University of New South Wales.

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FPSCh1 - 2010 Reed International Books Australia Pty...

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