Deck 20: Planning for Nontraditional Families

Question 1

Ted Bergen has just completed his degree in financial planning from a major university and is ready to start his first planning business. What is the first thing he should consider?

Answer 1

Ted needs a written business plan, even if he is just starting out. A financial planning business without a business plan is like a ship without a rudder.

Question 2

Describe the best method of valuing a financial planning practice.

Answer 2

There really is no best method of valuing a practice. This is because it is often difficult to assess exactly what intrinsic value is associated with any given practice. Also, the risk factor associated with a transaction is always hard to determine. Finally, since each practice is unique, and the parties involved in a sale transaction come in all shapes and sizes, no standard transaction structure has been developed that lends itself to an uncritical use in all situations.

Question 3

How is the financial planning business different from other businesses?

Answer 3

The financial planning business is labor-intensive. Since skilled labor is expensive, a financial planning firm is often faced with costs which rise faster than the ability of the firm to increase earnings, resulting in a perennial income squeeze.

Question 4

What is a mission statement? How is it formulated?

Question 5

What are the administrative management functions which should be the focus of a financial planning office?

Question 6

Describe the regulatory and social environment in which the financial planning practice must operate.

Question 7

Joan Collins wants to purchase several radio ads prior to presenting an important financial planning seminar. Are there some guidelines she should follow?

Question 8

What type of marketplace analysis is necessary for establishing a financial planning practice?

Question 9

How should seminars be used to expand a planning business?

Question 10

Question 1. Which of the following is not a factor contributing to the success of a financial planning firm?

A) A written business plan
B) A glossy brochure
C) A business plan
D) High-quality employees
E) None of the above

Question 11

Question 2. "External environment" refers to all of the following except one:

A) Economics of planning business
B) Marketplace analysis and scope of the target market
C) Administrative management functions
D) Regulatory and social environment

Question 12

What are the essential features for creating a business plan?

Question 13

What are the basic marketing devices? Which is the most important device?

Question 14

Explain how a financial planning firm might set its revenue/activity goals.

Question 15

Question 3. Which of the following alternatives is best for dealing with business expansion?

A) Raise fees
B) Work longer hours
C) Manage the practice
D) All are feasible methods
E) None of the above

Question 16

What are the strategic objectives of a corporate structure?

Question 17

Of the many marketing strategies available to a financial planner, which one is the best?

Question 18

Question 4. The key questions pertinent to marketplace analysis are as follows:

A) Do bankers, brokers, insurance agents, attorneys, and financial consultants provide financial planning services?
B) What are other financial planners and advisers doing to market themselves?
C) What services and products are other planners providing, and what is their fee structure?
D) A, B, and C are all pertinent
E) Neither A, B, or C is a pertinent question

Question 19

Describe the activities that should be performed on the day of the seminar. What is meant by "follow-up" after the seminar is presented?

Question 20

Describe the economic aspects of financial planning as a business.

Question 21

According to Jack DiFranco author of Chapter 22, how might a financial planner prepare his or her practice for sale?

A) Create systems to ensure the business operates efficiently
B) Set up the practice as a business so that it has the management system and personnel in place to continue after the departure of the principal
C) Maximize current profits by raising fees and cutting customized service
D) A and B
E) B and C

Question 22

Question 9. Calculating cash flow is extremely difficult because:

A) Proprietors mix their personal finances with those of the business
B) Financial planning practices have too much ups and downs
C) Rate of inflation is unpredictable
D) Buyers are so skeptical that they never accept cash flow numbers produced by the sellers

Question 23

Question 10. Determining the discount rate for the practice is not easy. Which of the following factors is not relevant in the decision?

A) Number of principals in the current practice
B) Economic conditions
C) Nature of client "book of business"
D) Stability of cash flows
E) Size of the business

Question 24

Question 5. Administrative management functions include none of the following except:

A) Financial management and control
B) Sending e-mail to customers
C) Quality control
D) Business structure

Question 25

Question 6. Marketing strategies include all of the following except:

A) Direct mail
B) Seminars
C) Consultation with financial experts
D) Advertising
E) Public relations