FINA4352 FINAL EXAM KEY TERMS QUESTIONS AND ANSWERS
WITH COMPLETE SOLUTIONS VERIFIED GRADED A++
understanding the client's personal and financial circumstances
step 1 of the financial planning process, obtaining qualitative and quantitative
information, analyzing information, addressing incomplete information
identifying and selecting goals
step 2 of the financial planning process, identifying potential goals, selecting and
prioritizing goals
analyzing the client's current course of action and potential alternative course)s)
of action
step 3 of the financial planning process, analyzing current course of action, analyzing
potential alternative courses of action
developing the financial planning recommendation(s)
step 4 of the financial planning process
presenting the financial planning recommendations
step 5 of the financial planning process
implementing the financial planning recommentations
step 6 of the financial planning process, addressing implementation responsibilities,
identifying, analyzing, and selecting actions, products, and services, recommending
actions, products, and services for implementation, selecting and implementing actions,
products, or services
,monitoring progress and updating
step 7 of the financial planning process, monitoring and updating responsibilities,
monitoring the client's progress, obtaining current qualitative and quantitative
information, updating goals, recommendations, or implementation decisions
asset accumulation phase
a client is usually in this phase until approximately age 45 or later if the client's children
are not yet independent, limited excess funds for investing, high degree of debt to net
worth, low net worth, lack of concern for risks
conservation/protection phase
a client is usually in this phase from approximately age 45-60 or immediately preceding
the client's planned retirement date, increases to cash flow, assets, and net worth,
decreases in proportionate use of debt, more risk-averse, long terms goals, such as
investing for retirement
distribution/gifting phase
a client is usually in this phase from approximately age 60, or the planned retirement
date, until the date of death, distribution strategies, implementation of estate planning
strategies, high net worth and cash flow, low debt
quantitative data
(objective data) is measurable or expressed as a quantity or number (copies of wills and
trusts and employee benefits and pension plan information)
qualitative data
(subjective data) is related to the subjective quantity of a client's life (risk tolerance level
and goals and objectives)
,visual learning style
tend to respond to visual objects, such as graphs, charts, pictures, and reading
information
auditory learning style
retain information by hearing or speaking
kinesthetic learning style
understand concepts better using a hands-on approach
illusion of control bias
exists when clients believe they can control or affect outcomes of, say, the market when
they cannot
money illusion
the misunderstanding people have in relating nominal rates or prices with real (inflation-
adjusted) rates or prices
conservatism bias
individuals initially form a rational view but fail to change that view as new information
becomes available
hindsight bias
a selective memory of past events, actions, or what was known in the past
confirmation bias
individuals look for new information or distort new information to support an existing
view
representativeness
, the tendency, when considering choices when making a decision, to recall a past
experience similar to the present decision-making situation and assume one is like the
other
mental accounting/money jar mentality
the tendency of individuals to mentally put their money into separate accounts (or
money jars) based on the purpose of these accounts
cognitive dissonance
when newly acquired information conflicts with pre-existing understanding, people often
experience mental discomfort
self-attribution bias
individuals take credit for their successes and either blame others or external influences
for failures
anchoring
individuals making irrational decisions based on information that should have no
influence on the decisions at hand
outcome bias
the tendency for individuals to take a course of action based on the outcomes of prior
events
framing bias
people are given a time of reference- a set of beliefs or values that they use to interpret
facts or conditions- as they make decisions
recency bias
WITH COMPLETE SOLUTIONS VERIFIED GRADED A++
understanding the client's personal and financial circumstances
step 1 of the financial planning process, obtaining qualitative and quantitative
information, analyzing information, addressing incomplete information
identifying and selecting goals
step 2 of the financial planning process, identifying potential goals, selecting and
prioritizing goals
analyzing the client's current course of action and potential alternative course)s)
of action
step 3 of the financial planning process, analyzing current course of action, analyzing
potential alternative courses of action
developing the financial planning recommendation(s)
step 4 of the financial planning process
presenting the financial planning recommendations
step 5 of the financial planning process
implementing the financial planning recommentations
step 6 of the financial planning process, addressing implementation responsibilities,
identifying, analyzing, and selecting actions, products, and services, recommending
actions, products, and services for implementation, selecting and implementing actions,
products, or services
,monitoring progress and updating
step 7 of the financial planning process, monitoring and updating responsibilities,
monitoring the client's progress, obtaining current qualitative and quantitative
information, updating goals, recommendations, or implementation decisions
asset accumulation phase
a client is usually in this phase until approximately age 45 or later if the client's children
are not yet independent, limited excess funds for investing, high degree of debt to net
worth, low net worth, lack of concern for risks
conservation/protection phase
a client is usually in this phase from approximately age 45-60 or immediately preceding
the client's planned retirement date, increases to cash flow, assets, and net worth,
decreases in proportionate use of debt, more risk-averse, long terms goals, such as
investing for retirement
distribution/gifting phase
a client is usually in this phase from approximately age 60, or the planned retirement
date, until the date of death, distribution strategies, implementation of estate planning
strategies, high net worth and cash flow, low debt
quantitative data
(objective data) is measurable or expressed as a quantity or number (copies of wills and
trusts and employee benefits and pension plan information)
qualitative data
(subjective data) is related to the subjective quantity of a client's life (risk tolerance level
and goals and objectives)
,visual learning style
tend to respond to visual objects, such as graphs, charts, pictures, and reading
information
auditory learning style
retain information by hearing or speaking
kinesthetic learning style
understand concepts better using a hands-on approach
illusion of control bias
exists when clients believe they can control or affect outcomes of, say, the market when
they cannot
money illusion
the misunderstanding people have in relating nominal rates or prices with real (inflation-
adjusted) rates or prices
conservatism bias
individuals initially form a rational view but fail to change that view as new information
becomes available
hindsight bias
a selective memory of past events, actions, or what was known in the past
confirmation bias
individuals look for new information or distort new information to support an existing
view
representativeness
, the tendency, when considering choices when making a decision, to recall a past
experience similar to the present decision-making situation and assume one is like the
other
mental accounting/money jar mentality
the tendency of individuals to mentally put their money into separate accounts (or
money jars) based on the purpose of these accounts
cognitive dissonance
when newly acquired information conflicts with pre-existing understanding, people often
experience mental discomfort
self-attribution bias
individuals take credit for their successes and either blame others or external influences
for failures
anchoring
individuals making irrational decisions based on information that should have no
influence on the decisions at hand
outcome bias
the tendency for individuals to take a course of action based on the outcomes of prior
events
framing bias
people are given a time of reference- a set of beliefs or values that they use to interpret
facts or conditions- as they make decisions
recency bias
