Financial planners are expected to make the best and most precise decisions for their clients. Many different strategies come into play when choosing which funds to invest in. In order to make the smartest investment decisions possible, those working to complete a financial planner certificate must partake in fund training. Since clients put a strong trust in their financial planner, the planner must perform to his or her highest potential. Three important considerations are: knowing what to ask clients, choosing which funds to invest in, and realizing the benefits of fixed rate annuities.
Upon completion of a financial planner certificate, one will be expected to act in a professional manner around his or her clients to find out as much information from them as possible. The first question to ask is, what are you looking for in a financial planner? The client's response will allow the planner to understand exactly what the client is expecting from him or her. Since every client is unique, oftentimes planners will have to alter their planning to fit the client's needs. Following the first question, the planner should ask how they might help achieve the financial objectives of the client. The reason for asking this would be to see how much of a presence the client would like the planner to have. For example, is the client looking to invest a substantial amount through different methods? Or is there one specific problem, such as retirement, for which he or she needs guidance? Lastly, ask what lifetime goals are most important in order to determine the type of investments are optimal to achieve the client's goals.
Having past experience with fund training becomes beneficial when choosing how and where to invest. In order for financial planners make choices that prove successful, they must first understand the benefits and disadvantages that come with various types of investments. Although it may seem like a risky venture, investing in mutual fund categories that other investors are selling can prove to be profitable. A real life example shows that such an approach generated a 3.7% annualized return from the beginning of the year 2000 through 7/31/2010; the most popular fund categories lost an average of 1.2% per year and the S&P 500 lost 0.8% annually. Therefore, investing in unpopular fund categories can quite possibly evolve into the most popular strategy—that is, for the right client.
Since financial planning relies heavily on strategy, planners must consider the benefits of fixed-rate annuities. Fixed annuities guarantee minimum crediting rates, return of principal at any time, and lifetime or period certain income. Additionally, there is no reinvestment risk, chance of periodic loss, or withdrawal fees. Most fixed annuities are meant for long term investing since the rate will not change. The importance and simplicity of lifetime annuitization cannot be overemphasized since client's perceptions about retirement are often off base. For example, a 2008 MetLife survey showed that people believed if their money was earning 10% per year, 10% of assets could be withdrawn annually, indefinitely. This shows the importance of the financial planner completing fund training to use in their client investment decisions.
Author Resource:
Cory Bowman is Director of Ops at the Institute of Business Finance. IBF has helped thousands of members of the financial services industry attain designations. For more information about IBF, fund training, financial planner certificate, visit http://www.icfs.com
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