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FIN 502 Chapter Notes - Chapter 1: Certified Financial Planner, Estate Planning, Financial Plan

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greyporcupine303
29 Nov 2017
School
Ryerson University
Department
Finance
Course
FIN 502
Professor
Joan Lobo

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Document Summary

Financial planning process a series of decision on how much money you need at some future time in order to meet your goals, and how you will get that money. Goals must be in monetary terms and have some date attached to them, in order to plan for them. To reach the goal, you have two sources of money: money now and money earned from investing (investment income) Financial goal (at time n) = existing savings + investment income for n years on the existing savings. + investment income on the annual savings, n. Types of financial planners: salaried employees of institutions, commission planners, fee based planners, and fee only or fee for service planners. Financial planners standards canada (fpsc) is an umbrella group that has a mandate to provide a uniform set of educational and practice standards for personal financial planning in canada. Module notes: a complete financial plan must include more than just our accumulated savings and investments.

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Related Questions

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)

Scenario 7 Investment Portfolio You know that there is a trade-off between risk and return when you choose an investment. The greater the return you expect to receive, the larger the risk you must take. Most people cannot afford to risk much of their money on investments that offer a high return. This, however, does not mean that they must accept only low returns on their investments. Through diversification, a fair return can be achieved without taking unreasonable risks. Asset allocation is the process of choosing a variety of investments that offers different combinations of risk and return. Then, if one investment fails to do well, others may make up for its poor performance by being successful. The objective for each investor is to select a portfolio of investments that meets his or her individual financial goals. Your cousin, Maya (28 years) and her husband, Peter (32 years), have very different views when it comes down to investments. Peter wants to save some money for a down payment on a house and wants to put all their money in bank accounts, whereas Maya wants to put all their money into growth stocks so that they can accumulate the money faster. They are seeking your advice. What would you suggest them to do and why? (Use vocabulary – asset allocation, rule of 72, time factor, age, types of stocks, bonds, treasury securities, mutual funds)

With a new baby in the family, Ross and Reena want to put their finances in order. They have three main goals in planning their estate:

· If one of them dies, they each want to make it easier for the other to carry on financially. To start, they'd like to have enough money to pay off their mortgage.

· They want to leave their child in good hands, with enough money to meet his needs in case something happens to both of them.

· They want to make it as easy as they can for family members to settle their estate and pay any final costs.

Ross and Reena decide to talk to a financial professional. Together, they agree to do three things:

· First, they each write a legal will. They name Reena's sister to take care of their child if something happens to both of them.

· They each get a $300,000 life insurance policy and name the other spouse as the beneficiary. That way, whoever survives will have enough money to pay off the mortgage and any final costs, such as a funeral. If something happens to both of them, the money will help the sister raise their child.

· They set up a Registered Education Savings Plan for their child's future education. They plan to save just $80 a month to start. They will save more as their incomes go up.

For now, Ross and Reena can rest easy. They know they will have to update their wills from time to time, especially if they have more children. However, they have taken care of all their main concerns.

Describe two (2) estate planning tool that is been utilized by Ross and Reena

Briefly explain three (3) lessons that can be learned from Ross and Reena

Since Ross and Reena are interested in survivorship benefit they could also decide to begin an annuity. Explain two types of annuity that would offer survivorship benefit to Ross and Reena.