section 1 - The American College Online Learning Center

stocks which might have wide dispersions in any given year. The planner mustcontrol the access points to the assets separately.d. Planners who do not hold funds separately (and just rely on the index or themanager of the product) may not be comfortable with the results. In other words,this fund may force assets to be sold at a low value.e. Fund managers need to think about the particular client’s current income need.f. At any given point in time, the planner should be able to determine where to getthe assets to fund the client’s current income need.7. ETFs have become popular because of the granularity that can be created with assetallocation.a. Planners can capitalize on ETFs by rebalancing, or active management strategies,or tactically waiting to see what needs to be sold to generate current incomefor the client.b. If the client owns enough asset classes, it is likely they will be able to sell a“winner” to fund current income.8. As the client’s net worth declines over time, it becomes more difficult to own assets insmall enough pieces in order to effectively create retirement income.a. Planners often revert back to balanced funds and other combined products at thisjuncture in order to maintain cost efficiency.9. The market in which the client is involved may dictate the investment strategy used.a. Middle-market clients may use more mutual funds. Affluent-market clients mayuse ETFs or individual stock or bond holdings.b. In some cases, it may be less about the size of the client’s portfolio (middlemarket vs. affluent) and it may be about how the planner is compensated. Butthis constitutes an ethical violation since the client’s situation, not planners, shoulddictate the portfolio.10. Investment strategies that control when taxes are realized may add value to the client.LO 7-2-2: Investment products used for the systematic withdrawalapproach1. Overview: There are an unlimited amount of products that can be used to invest clientassets when the systematic withdrawal approach is used. What follows is a list ofsome of the strengths, weaknesses, and applications of some of the more commonproducts. (Video: What investment products should be used for the systematic withdrawalapproach? Littell, Lemoine, Kitces, Guyton)2. Bond mutual funds, which are actively managed, may be appropriate for the incomeproducing portion of the portfolio.3. Deferred fund annuities may be appropriate for the income producing portion of theportfolio.a. Planners should avoid surrender charges.4. Deferred variable annuities may be appropriate for the equity side of the portfolio heldfor the later years.a. They can help to protect the withdrawal rate.5. Growth and value equity funds might be appropriate for the side of the portfolio heldfor later years.7.19