Distinguish between savings and investing (what\'s the difference, different typ
ID: 2628756 • Letter: D
Question
Distinguish between savings and investing (what's the difference, different types, what role can each play in your portfolio).- Discuss the importance of ethics when working with financial planning professions (you can do some of this yourself, but you may also wish to hire a professional).- Explain the concept of return on investment and identify what part it will plan in your financial plan.- Explain risk vs. reward related to your personal financial goals.- Describe how the cost/benefit analysis impacts your choices (discuss opportunity cost).- Explain how savings and investing are impacted by the time value of money.- Describe how interest rates impact time value of money calculation (use time value of money concepts and calculation to plan your savings and investing part of your financial planning goals, show examples with calculations)
Explanation / Answer
A Manageable Client Base: Make sure the advisor does not have so many clients that they will not be able to devote sufficient attention to you, advises the NAFPA. A Solid Business Continuity Plan: If your advisor retires, changes professions or passes away, he should have a plan for who will take over the management of your account. Lack of Pressure: Your advisor should give you all the time you need to make decisions. You shouldn't feel like you're on a deadline. Clear Communication: Your advisor should prepare an investment policy statement that explains the plan for your finances in language you can understand, recommends the CFA Institute. All communications from your advisor, including the explanation of fees, should also be easy to understand. You have a right to a planner with integrity, one who earns your trust and treats you honestly. A planner's advice should be objective and focused solely on your needs. Your planner should be competent and well-educated about the financial planning profession, with a continuing commitment to stay informed about new developments in the financial industry. You should be treated fairly, and your planner should tell you clearly how your professional relationship will work, how the planner will be compensated, and any potential conflicts of interest that may exist. Your planner should keep any personal information you provide confidential. The planner you work with should have any required licenses or credentials necessary to do the work you ask the planner to do. Finally, planners should be diligent in performing any work they agree to do, not only in developing a financial plan for you, but also in helping you to implement it.