Review Questions

1. List the team of professionals that may help you plan your financial future. Who might provide investment advice? (See page 10-1)

2. List sources of information that can help you learn about investment products and strategies. Identify two unbiased sources that are available to everyone. (See page 10-2)

3. Given the variety of investment education print and Internet resources provided by companies associated with the securities industry, what criteria might a consumer use to evaluate business-sponsored materials? (See page 10-2)

4. Under what circumstances might it be prudent to contact a financial advisor? (See page 10-3)

5. Your financial knowledge and confidence, as well as the complexity of your situation, will guide the need for professional assistance. List the 10 professionals who might be involved, noting the service(s) each provides. (See pages 10-3, 10-4, and 10-5)

6. Review the list of professionals who might make up your financial team. Beyond the obvious requirements for professional practice, what additional designations might you consider? (See pages 10-3, 10-4, and 10-5)

7. How might a financial professional be compensated for the products, services, or advice provided? (See page 10-5)

8. Summarize the six-step process for locating a financial professional that best meets your needs. (See pages 10-6 and 10-7)

Just Do It!! Acting on What You Learned

Because Internet sites change frequently, the uniform resource locator (URL) for the specific tool or page is not given below. Instead, the URL for the site, and instructions for navigating within the site are provided. It is our hope that this method will encourage you to explore and learn from the site, and more importantly, avoid the message: “Error: Site Not Found.”

Disclaimer: References to commercial sites are not an endorsement of the company or the financial products or services offered. These sites are included only because of their educational value; sites provided by competing companies may offer similar benefit. We encourage you to explore other sites of your choice.

1. This unit recommends that you periodically review your portfolio to assess your investment strategy. In other words, will your current combination of investment products enable you to meet your financial goals? Review the information in Unit 2 on asset allocation, as well as the print or Internet sources noted. If the percentage of assets allocated to the different categories of investments has changed significantly over the period of review (e.g., one year), it may be necessary to “rebalance” the portfolio by selling some assets and investing in others. This decision requires serious consideration and may require you to consult with your financial professional, if he or she has not contacted you for a periodic review.

2. This unit recommends that you carefully monitor your monthly mutual fund investment statements. You can use these statements to track price changes and performance, but more information may be useful. Information included in company newsletters or other independent reports may compare individual fund performance to a benchmark, or standard index, such as the S&P 500 Stock Index for large-capitalization stocks, the Russell 2000 Index for small-capitalization stocks, or the MSCI EAFE Index for international stock funds. Use the print or Internet resources noted throughout the units to learn more about these indexes and the appropriate comparison for the funds you own.

3. When reviewing your individual investments or entire portfolio, it is wise to remember: risk and reward are inversely related. Too much risk exposure can result in unsettling investment volatility that pays off big and loses big as the market experiences normal ups and downs. Conversely, extremely conservative investments can offer limited return in the long run. Recall the story of the tortoise and the hare as you consider your alternatives. You may need to postpone or scale back your goal OR you may need to save more today. To avoid surprises, review your progress toward your goals and judiciously make changes.

4. Comprehensive financial planning typically includes the following components tailored to the needs of the client:

· Cash and credit management

· Income tax management

· Retirement, education, or other long-term goal planning

· Asset or investment management

· Risk management (insurance)

· Estate planning

As a preliminary step, whether you intend to manage your own affairs or seek professional advice, get yourself organized. For each category above, develop a complete list of accounts noting account balances, levels of coverage, professionals involved, and other relevant information. Use this list as a starting point to (1) evaluate your current situation, (2) seek needed information, and (3) make necessary changes to better meet your financial goals.

5. Using the References and Resources noted in this unit, contact the CFP Board of Standards and the National Endowment for Financial Education for the pamphlets on choosing and using a financial planner.

6. Review the questions to ask a financial professional from Step 4 of the six-step process to choosing a financial professional. Which ones are most important to you? Which ones are least important to you? Consider the financial professionals that currently provide your financial products, services, or advice. Did you ask these questions when you began that relationship?

Notes