AAMS Module 1 Asset Management
Process Verified 2024
Based on the financial cycle model, list two important forces that affect how most clients
live. - ANSWER-1 income
2 the financial requirements needed to maintain an adequate lifestyle
Define the stages in the cycle of financial life that have surplus and deficit periods. -
ANSWER-a. income surplus: the two periods when income exceeds expenses—the
"early working years" (before children) and the "late working years" (after children are
through college and out of the house)
b. income deficit: the period when expenses outpace income; typically the "family
raising" years, when the client incurs the costs of raising a child, buying a home or
trading homes, and obtaining consumer credit
c. small surplus: the period, during retirement, when income slightly exceeds expenses
Describe five aspects that make up a client's investment personality. - ANSWER-a. The
client's willingness to take risk. The client's current investments are often a useful guide.
Risk-averse clients fear losing what they have acquired; aggressive clients fear missing
out on an opportunity for potential gain.
b. The client's patience. Does the client think in terms of years, months, or weeks? Will
the client allow time to become an ally and work to his or her advantage?
c. The client's ability to plan in advance. The existence of regular savings and retirement
accounts and established ties with tax planners and other financial advisors provide
evidence of the client's tendency to plan.
d. The client's willingness to share private, personal information. A client who is
distrustful of financial advisors will be reluctant to reveal anything about his or her
personal finances.
e. The client's market attitude. Is she a contrarian or a follower? The follower is open to
guidance from the media, friends, neighbors, and so forth. The contrarian will do the
opposite of what the crowd is doing.
Return to question.
Explain how the client's investment experience, holdings, and outlook can affect the
asset management process. - ANSWER-Determining a client's prior investment
experience gives the investment professional a much better foundation for "knowing
your customer." The investment professional must know what the client's current
