Client data gathering and financial goal setting
What the exam tests
Domain 2 tests the quality of the fact-find and the discipline of turning client hopes into measurable goals. Expect quantitative data (balance sheet, cash flow, tax returns, policies) and qualitative data (attitudes, experience, values, health, family obligations), plus goal prioritisation and time horizons.
Core rules
- Gather both hard facts and soft facts; verify documents rather than relying on memory.
- Separate risk tolerance (willingness to accept volatility) from risk capacity (ability to bear loss without damaging goals). The lower of the two governs the plan.
- Goals should be specific, measurable, achievable, relevant and time-bound; express them in today's money and inflate to the target date.
- Rank goals by essential versus discretionary and by flexibility; essential short-term goals need low-risk funding.
- Record assumptions: inflation, return, tax, longevity and contingency.
Worked example
A client wants 300,000 for a child's education in 10 years and has 60,000 invested. At an assumed 5% nominal return, the 60,000 grows to 60,000 × 1.05^10 = 97,734. The shortfall is 202,266. Using a monthly annuity factor at 5%/12 for 120 months (about 155.28 per 1 of monthly payment), the required monthly saving is about 202,266 ÷ 155.28 ≈ 1,303. If the client can save only 800, the goal is not achievable on those assumptions; the planner must extend the horizon, lower the target, or raise the return within acceptable risk - and say so.
Traps
Accepting a self-reported 'aggressive' tolerance when capacity is low; mixing nominal and real figures; ignoring inflation; setting vague goals; failing to prioritise when goals compete; not documenting the fact-find.