Week 1 - Introduction to financial planning Flashcards
What is the definition of financial planning for an individual?
Process of setting, planning, achieving and reviewing your life goals through proper management of finances
What is the definition of financial planning for a financial planner?
Process whereby a client’s financial position is analysed and a set of recommendations put in place through a rational financial goal
What are the four areas of financial planning?
- Investments
- Superannuation
- Insurance planning
- Estate planning
What are the interconnected issues associated with all areas of financial planning?
- Cashflows
- Taxes
- Social security
- Investment performance
- Behavioural finance
What a financial planners activity processes?
- Cashflow management / Tax
- Risk management / Insurance planning
- ST/MT investment planning
- Retirement planning
- Estate planning
What are the three economic indicators?
- Procyclical indicators
- Metrics that move with the economy - Countercyclical indicators
- Metrics that move in opposite direction of the economy - Lending indicators
- Change before the economy changes
What are the things a financial planner needs to know about their client?
- Needs vs wants
- Objectives
- Financial circumstances
- Family circumstances
- Motivational factors
- Requirements
- Perception of financial planning
What are the issues of financial planning?
- Every client is different
- Needs change over time
- Constant risk assessment
- Appropriate investment & structure
-Impacts of economic variable - Changes in gov policy
When does financial planning start?
When someone becomes financially independent
Why is there a need for financial planning?
What is the rule of 72?
Reveals the number of years for principle to double
72 / i = n
72 / n = i
n = number of years
i = interest rate
What issues were identified by the royal commission into financial planning?
- Fees for no advice
- Appropriateness of advice
- Planner education standards
- Remuneration
- Culture / ethics
What is ASIC?
Australian securities and investment commission
- Financial services industry regulator
- Responsible for consumer protection
What is APRA?
Australian Prudential Regulatory Authority
- Regulators of superannuation and insurance
What is the ATO?
Australian Tax Office
- Responsible for tax legislation
- Responsible for self-managed superannuation
