Life Events

Lesson

Life events can significantly impact a client's financial situation and investment goals, and financial professionals must understand and account for these events when creating a client profile.

Practice Question #1

Which of the following life events is most likely to impact a client's investment strategy?

A) Attending a concert

B) Going on vacation

C) Birth of a child

D) Buying a new car

Select an option above to see an explanation here.

A) Attending a concert is a short-term expense and unlikely to significantly impact a client's investment strategy. B) Going on vacation is a short-term expense and is unlikely to impact a client's investment strategy significantly. C) The birth of a child can have significant financial implications, such as increased expenses for childcare and education, which may require adjustments to a client's investment strategy. D) Buying a new car is a short-term expense and is unlikely to impact a client's investment strategy significantly.

Terms

Life events:: Significant occurrences in a person's life that can impact their financial situation and investment goals.
Marriage:: A legal union between two individuals, which can affect their financial planning and investment strategies.
Divorce:: The legal dissolution of a marriage can have significant financial implications for both parties.
Birth of a child:: Adding a new family member can impact financial planning and investment goals.
Job change:: A change in employment can affect a person's income and financial stability.
Retirement:: The period in a person's life when they stop working and begin to rely on their investments and savings for income.
Inheritance:: The receipt of assets from a deceased individual can impact a person's financial situation and investment goals.
Death of a spouse:: The loss of a partner can have significant financial implications for the surviving spouse.

Practice Question #2

How might a job change impact a client's investment strategy?

A) It may not affect their investment strategy at all.

B) It may require adjustments to their risk tolerance and time horizon.

C) It may require adjustments to their asset allocation.

D) Both B and C are correct.

Select an option above to see an explanation here.

A) A job change can affect a client's income and financial stability, which may necessitate adjustments to their investment strategy. B) A job change may require adjustments to a client's risk tolerance and time horizon, depending on their new income and financial stability. C) A job change may require a client's asset allocation adjustment, depending on their new income and financial stability. D) Both B and C are correct, as a job change can impact risk tolerance and asset allocation.

Historical Example

In the early 2000s, many people experienced job losses due to the economic recession. This life event impacted their financial situations and investment goals, leading many to reevaluate their investment strategies.