Client Relations and Practice Management Flashcards
6 cards from real Financial Advisor practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Client Relations and Practice Management flashcards as text
Which life insurance concept involves paying premiums for a limited number of years while maintaining lifetime coverage?
Answer: Limited pay whole life insurance
Limited pay whole life insurance requires premium payments for a specified period (e.g., 20 years or to age 65), after which the policy is paid up but coverage continues for life.
When a client experiences a major life event such as marriage, the financial advisor should primarily:
Answer: Proactively contact the client to update their financial plan
Major life events—marriage, divorce, birth of a child, job change, inheritance—should trigger a proactive financial plan review to update goals, beneficiaries, and strategies.
The 'Monte Carlo simulation' in financial planning is used to:
Answer: Model a range of possible outcomes by running thousands of random scenarios
Monte Carlo simulations use random sampling to model thousands of possible return scenarios, expressing retirement plan success as a probability rather than a single projection.
A financial advisor discovers that a client's estate plan has not been updated in 15 years and does not reflect current tax law or family circumstances. The best course of action is:
Answer: Refer the client to an estate planning attorney and document the referral
Advisors should identify estate planning gaps and refer clients to qualified estate attorneys while documenting the referral, staying within their scope of practice.
Which of the following best describes a 'fee-based' financial advisor as opposed to a 'fee-only' advisor?
Answer: A fee-based advisor can earn both fees and commissions; a fee-only advisor earns only advisory fees
Fee-based advisors can collect both advisory fees and commissions, while fee-only advisors are compensated solely through fees paid directly by clients with no commission income.
When calculating a client's net worth for financial planning purposes, which of the following is included as a liability?
Answer: Outstanding mortgage balance
Net worth equals total assets minus total liabilities; outstanding mortgage and loan balances are liabilities subtracted from the asset total.