Reference no: EM133167640

Problem 1

Justine is 45 years old and is an opera singer. She recently received an inheritance amounting to $100,000. Her first thought is to travel to Italy for a year and study opera in Milan. Her brother James, an accountant, is concerned for her future. James and Justine have made an appointment to get your financial advice. James is hopeful you will be able to influence Justine to invest her windfall rather than spend it. During the discussion on risk profile, it becomes obvious that Justine has lost interest and is not engaged. Suggest ways you might approach the situation and what techniques you might employ to demonstrate to Justine the importance of correctly determining her risk profile to assist in financial decision-making.

Problem 2

Louise and Michael, who are both aged 60, have owned a drafting business for the last 20 years. All their children are grown up and self-sufficient and hence the couple think this is a good time for them to make some plans for their retirement, which they hope to be around age 65. Neither Louise nor Michael has any specific knowledge as to what a financial adviser does, nor do they understand what is involved in the financial planning process. Louise is particularly concerned about privacy issues and is reluctant to answer any specific questions.

Discuss with Louise and Michael what services you offer and explain to them the financial planning process. Additionally, discuss with them what information they will need to supply and how this information will be used.

Problem 3

The use of risk-profiling instruments has long been a contentious issue among many practitioners. Provide a balanced argument based on a review of the literature relating to the usefulness of these instruments.