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Working with Retail Clients - Coggle Diagram
Working with Retail Clients
Introduction
Financial Planning focuses on why an investment is made, not just what is invested in.
Goal: long term financial independence + security through planning
Components: investments, tax planning, estate planning, protection / insurance, legal considerations
Objectives: achievable, allow small changes, not intimidating, cover necessities & small luxuries
Role of FP: quaterback, provides advice, cant advice on unlicensed aread, clarify goals, st priorities, maintain discipline
Financial Planning Approach
Steps in Financial Planning (every credit analyst researches investments precisely - ECARIP)
establish client advisor relationship: build trust, create 'letter of engagement' (outlines roles, fees, responsibilities, terms)
collect data + info: gather financial + personal info (age, marital status, risk profile, income, expenses, assets, liabilities, tax details, decision style, communication preferences, dependents)
analyse data + info: evaluate clients current position, constraints, goals and determine gaps
recommend strategies: develop + present clear realistic actionable plan
implement recommendations: execute the plan - invest funds, buy insurance, set up estate
conduct periodic review + follow up: reassess annually or when life circumstances change (new job, divorce, inheritance)
Life Cycle Hypothesis
states that level of investment risk a person can take depends on their stage of life (income, responsibilities & financial goals)
each stage affects: investment obj; liq needs; time horizon
stages
early earning yrs: 18-35; short term to possibly long term goals, light commitments, small but growing portf can afford high risk
family commitment yrs: 25-50; short term to med term; highest commitments; low liq as most money tied up in expenses
mature earning yrs: 45-60; med to long term goals, commitments moderate as kids grow; highest wealth accumulation; income high; debts low
nearing retirement: 55-70; med term goals; commitments lighten; good savings, low risk tolerance, focus on cap preservation
retired: 60+, med term goals, commitments minimal; income & maintaining lifestyle focused, low risk apetite
age overlap: risk tolerance reduces, liq needs changes, goals shift from growth > income > cap preservation
Estate Planning
Passing on the Estate
estate planning: transfer assets smoothly to next gen, minimize taxes, avoid legal problems after death
testator (one who drafts will), beneficiary (person receiving assets), executor (person managing + distributing estate also called trustee or liquidator in Quebec), intestate (dying without a valid will - assets distributed by provincial law)
Factors to consider when making a Willl
purpose of will: identify beneficiaries, appoint executor, deals w debts taxes funeral expenses, revoke prev wills, describe distribution of assets; codicil = formal amendment of an existing will
choosing capable executor (honest organized available), consider complexity & size of estate, naming alternate executors, review + update will every 3-5 yrs after major life events; marriage revokes will except Quebec
executors role: pay debts +taxes; identify distribute assets; manage estate accounts; maintain honest + transparency
estate freeze: reduce future taxes; freezes value of shares owned by a taxpayer so future growth is transferred to heirs; commonly used by business owners
revoking a will: will is still valid until revoked or replaced; create a new will starting with 'I revoke all former wills & condicils'; marriages revikes a will (ex in Quebec alb BC); divorce doesnt automatically revoke a will
Probate
legal process where court validates a will + appoints executor
ensures will is authentic + debts are cleared
common law provinces valid if signed witnessed and unrevoked; quebec (only holographic & witnessed wills need probate; notarial wills do not)
types of wills: formal/notarial (signed before notary+witnesses automatically valid); holographic (handwritten by testator, valid except in PEI); multiple wills (used for assets in diff countries, must be drafted carefully)
joint tenancy: if two people own property as joint tenants, survivor automatically inherits others share; avoid probate + delays
Power of Attorney & Living Will
poa: legal doc where one person (donor) gives authority to another (donee/authority) to act on their behalf
types: general or financial (property or financial matters); personal care (health / lifestyle matters); enduring / continuing (remains valid if donor becomes incapacitated)
Quebec terms: POA=mandate; donor=mandator; donee=mandatory
living will / advanced heatlhcare: persons med treatment wisshes if theyre termiinally ill or incapacitated; living will=general guidelines; advance directive=specific instructions (life support preferences); merged into one doc
if no POA: court appoints guardian to manage property + healthcare; slow expensive less flexible
Ethics & the Advisor's Standards of Conduct
Ethical Decision Making
ethics = set of moral principles that guide behavior in a profession; moral values = deep beliefs about what right or wrong
ensure public trust
follow spirit of rule
tackle moral dilemma: 1. recognize moral dilemma 2. assess choices 3. commit to moral strategy 4. courage to follow through
CIRO = formed june 1 2023, regulates IDs + MF dealers; rule 1400 & 14002 = setting standards of conduct for all regulated persons
rule 1402 = act openly fairly ethically; avoid unbecoming or harmful behavior; not be negligent or non compliant; avoid damaging investor confidence
Standards of Conduct & Ethical Guidelines
duty of care = KYC, due dilligence, careful w unsolicitated orders (understand cx needs and only act on valid cx instructions)
integrity = cx interest first, protect cx assets; give complete accurate info; full disclosure (act honestly + transparently, never mislead or priortize personal gain)
professionalism = conduct yourself properly, execute trades by reg acc, no personal biz conflicts, continous education (maintain high personal prof standards even outside work)
compliance w securities act = follow CIRO + securities act rules, no insider trading (follow all regulations, insider info use is illegal)
confidentiality = protect cx data , use cx data only w consent (cx privacy is sacred, no sharing info w/o authorization)