Background

Tom and Sharon Brown are not happy with their current investment advisor. They are seeking investment management and financial advisory services from someone they can trust. You are a registered investment advisor in your home state of Kansas. You have been in business for seven years and work with a select group of 70 clients. You offer financial and investment planning advice for either a percentage of assets under management or hourly fees. During the initial meeting with the Browns, you gather the following financial information:

Personal Data & Background Information

Primary Contact: Tom Brown Age: 53 Occupation/Title: Operations Management / VP of Operations

Secondary Contact: Sharon Brown Age: 56 Occupation: Home Maker

Children: Tom does not have any children of his own. Sharon has three children in college from her previous marriage; Maggie, 18; Shelby, 20; Candy, 22.

Marital Status: Comfortably married for eight years.

Relevant Financial Information

The Browns estimated net worth is $3 million. The majority of their financial wealth is allocated among Individual Retirement Accounts, Toms 401(k) plan, and a taxable investment account.

Sharon was widowed in her first marriage and the majority of the savings in the taxable account is life insurance proceeds. The account is a joint account and Sharon hopes to use a portion of the savings to help her girls purchase their first home. They have a 529 plan for college expenses.

Tom has an above average risk tolerance and Sharon leans more toward conservative, low risk investments.

Financial Objectives

Seek and find a reputable, ethical investment advisor to aid in their wealth accumulation and financial development.

Both have had undesirable experiences in the past working with other financial planning professionals and seek to understand the regulatory and ethical requirements for financial planners.

Work with an advisor to help them agree on an investment strategy to preserve their savings for future retirement.

7. Yesterday, Tom was golfing with his best friend, Phil, who is the CEO of ABC company. In conversation, Tom learns that Phil will be announcing next week that ABC company fourth quarter revenue significantly exceeded projections. Tom tells you about the conversation and instructs you to purchase 2,000 shares of the stock. What should you do?

a) Purchase the stock as instructed by your client.

b) Refuse to purchase the stock and request that Tom no longer engage your services.

c) Ask Tom to put the request in writing, and then you will place the trade.

d) Advise Tom to purchase the stock at a later date after the announcement has been made public.

8. Sharon's youngest daughter, Maggie calls you directly. She informs you that Sharon requested she call and obtain the balance of the 529 plan that Sharon uses to pay her yearly education expenses. You should:

a) Suggest that the Browns set up a meeting in your office to go over the account with Maggie.

b) Disclose the information over the phone because you represent Tom, Sharon, and their children as clients.

c) Give Maggie the online account password to check the balance herself.

d) Request permission directly from Sharon to discuss the account with Maggie.