section 1 - The American College Online Learning Center

j. Planning Point: Planners can use either historical returns or project future returns.Historical data provides safety for the planner because it is a well acceptedtechnique and requires no guessing.k. Planning Point: When using historical Monte Carlo analysis, planners may wantto consider using a higher inflation assumption than the historical rate in orderto be more cautious in their analysis.7. What techniques can planners take to ensure clients understand what they are presented?a. Have the client repeat back what you have said and, more generally, activelyparticipate in the meeting.b. To keep the client focused, have them participate in the meeting with feedbackquestions.c. Follow-up phone call to make sure they are still comfortable with the plan.d. Communication is critical to success!8. Is proprietary software as good as the commercially available software?a. In many cases, proprietary software is a rebranded commercially available tool.b. Some companies have unique proprietary software systems that are quite good.c. Other large broker-dealers use branded software like eMoney and NaviPlan—andlimit the range of assumptions that can be usedd. Branded software has more controls than proprietary software and often does notallow the planner or client to change assumptions as freely.e. Software tools are critical to the advisor and it’s in a company’s best interest tohave excellent current tools that meet the advisor’s needs.LO 1-4-3: Learn how behavioral finance affects client communications1. What is most important to people: money, medicine, meaning or place where the clientlives (Video: How behavioral finance affects client communications: Littell, Jordan)a. No matter what age, meaning was ranked most important.b. As we age, meaning becomes more important and money less important.c. Advisors, when asked what is important to their clients, often get the answerwrong (they perceive money or medicine as the key issue).d. Clients care about how the financial issues fit into their lives.2. How do people actually make financial decisionsa. This is the foundational piece of behavioral finance.b. Two parts of the brain(1) Left side – analytical(2) Right side – behavioral and emotionalc. Those in financial services spend more time on the left side - focusing on facts,charts, and graphs.d. People make decisions that go beyond what they factually know - beyond knowingis believing and feeling.e. Our culture in the “information age” has altogether focused too much on theanalytical side.f. Relationships matter—as illustrated by research showing that patients who havemore time with their doctors are less likely to sue.g. The financial services point of view has been ‘how do you take emotion out of thedecision making’ – that is the wrong question - the right question is ‘how do youaccommodate emotion and behavior.’1.23