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Steve & Sally Smith Case Bob Booth, CFP Financial Planning Office Kim Rhoades, Executive Assistance Dialogue of phone conversation to 777-777-7777 January 3rd, 20117,10 €
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Steve & Sally Smith Case Bob Booth, CFP Financial Planning Office Kim Rhoades, Executive Assistance Dialogue of phone conversation to 777-777-7777 January 3rd, 201
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Steve & Sally Smith Case Bob Booth, CFP Financia
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Steve & Sally Smith Case Bob Booth, CFP Financia
Steve & Sally Smith Case
Bob Booth, CFP
Financial Planning Office
Kim Rhoades, Executive Assistance
Dialogue of phone conversation to 777-777-7777
January 3rd, 2019
Bob Booth, CFP Financial Planning Office
Kim Rhoades, Executive Assistance
Dialogue of phone conversation to 777-777-7777
January 3rd, 2019
Kim: Good afternoon, Bob Booth Financial Planner
Steve Smith: Hello Kim, I would like to set up an appointment to meet with Bob to discuss
our investments.
Kim: Certainly, Mr. Smith. I hope you and your family had a wonderful Christmas
holiday. Are you available next Friday, perhaps in the afternoon?
Steve Smith: That sounds good, Kim. Let’s plan on about 2 PM if that is OK. I have
classes that morning.
Kim: Perfect. Bob might have some questions for you in advance of the meeting,
so watch for an e-mail, OK?
Steve Smith: Yes, that’s fine. I am sure he will want some information to help prepare for
the meeting. We’ll be waiting for it.
Kim: Ok terrific. It will be nice to have you back in the office again. Will Sally be
joining you?
Steve Smith: I’ll have to check her work schedule. Probably. She has been pretty “in” to
checking out stocks lately, which is one of the reasons I think we need to
meet. I am a little uncomfortable with some of the things she is suggesting.
Kim: Oh, Ok, Mr. Smith. I’ll be sure to pass that along to Bob. Have a nice day,
and we’ll see you next Friday!
Client meeting – January 11th, 2:00 PM - Bob Booth Notes
I met with Steve and Sally Smith for about an hour today. They have been taking our advice
to heart and are doing a much better job of controlling their spending. They are already
making great progress on reducing their debt. The meeting today focused on investing. Both
Steve and Sally expressed concern the return on their investments may not be sufficient to
ensure they will have a comfortable retirement. I also think both are suffering from a little
fatigue, since they have been tightly controlling their spending for some time now. They
seemed to want some reassurance their sacrifices will pay off. Sally in particular had a ton of
questions. She has clearly been doing some reading and online research on investing. With
her IT background, she is particularly interested in Technology stocks, and has been
questioning if they should consider devoting some of their money to the sector. Steve,
however, seemed less comfortable with this idea. We had a good discussion about the merits
of diversification.
I have attached to these notes the information I initially collected from the Smiths regarding
their investments. They have a fairly large portion of their savings invested in Cornelius
stock, which is illiquid and has not been performing well. The remainder of their savings is
spread across balanced mutual funds they either acquired on their own or through their
employer. Sally is not impressed with the returns on these funds, and is questioning whether
they should expect more than 8.5% return in order to meet their retirement objectives. They
have some flexibility with how they can allocate their 403(b) savings.
With some pushing from Steve, the Smiths decided they wish for us to take leadership of their
investments. I promised to prepare an Investment Policy Statement for their consideration.
, INVESTMENT INFORMATION
Steve owns 1,000 shares of Cornelius Inc. stock that he inherited. Its current value is $30,000
and it pays a dividend of 22 cents per share for a total of $220 per year, which is not included in
the income statement because it is reinvested. Cornelius Inc., is a small-cap stock.
Five years ago, Steve and Sally invested in a balanced mutual fund that was initially started with
$15,000 from their savings. They have reinvested all dividends and capital gains each year.
The gains and dividends together reported on their tax returns and reinvested from the balanced
mutual fund were as follows:
Dividends & Interest Capital Gains Total
5 Years Ago $350 $250 $600
4 Years Ago $375 $1,200 $1,575
3 Years Ago $400 $500 $900
2 Years Ago $450 $900 $1,350
Last Year $500 $600 $1,100
Steve and Sally both participate in their employer’s 403(b) retirement plan. Both of their 403(b)
plan portfolios are invested in a balanced mutual fund expected to earn 8.5%. Their overall
expected investment rate of return is 8.5%.
Steve currently contributes 3% of his salary to his 403(b) plan. The employer matches each $1
contributed with $1 up to a total employee contribution of 3%. Sally also contributes 3% to her
403(b) plan. Steve’s balance is $42,000, and Sally’s is $55,000.
Risk Tolerance Questionnaire
Global Portfolio Allocation Scoring System (PASS) for Individual Investors
Questions Strongly Agree Neutral Disagree Strongly
Agree Disagree
1. Earning a high long-term total return Steve Sally
that will allow my capital to grow faster
than the inflation rate is one of my most
important investment objectives.
2. I would like an investment that provides Steve
me an opportunity to defer taxation of Sally
capital gains to future years.
3. I do not require a high level of current Steve
income from my investments. Sally
4. I am willing to tolerate some sharp Sally Steve
down swings in the return on my
investments in order to seek a
potentially higher return that would
normally be expected from more stable
investments.
5. I am willing to risk a short-term loss in Sally Steve
return for a potentially higher long-run
rate of return.
6. I am financially able to accept a low Steve
level of liquidity in my investment Sally
portfolio.
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