Situation 2: “While I knew it might happen someday, I didn't expect it right now.” This...

Situation 2: “While I knew it might happen someday, I didn't expect it right now.” This was the reaction of Patrick when his company merged with another organization and moved its offices to another country, resulting in him losing his job. Patrick does have some flexibility in his shortterm finances since he has three months of living expenses in a savings account. However, "three months can go by very quickly," as Patrick noted.

a. Identify the main financial planning issues that need to be addressed.

b. Suggest any TWO additional information either quantitative or qualitative you need before making recommendation.

c. Recommend the most appropriate TWO actions based on the information provided and your assessment of the situation,

Expert Solution

Answer a) As per situation of distress financial need , the main planning issues are

Capability of Personal savings: there should be a proper plan for regular personal saving, such saving may use during financial distress situation
planning to absorb sudden financial shock: financial planning should have buffer to meet immediate financial need.
liquidity management: Investment should be well diversified to meet liquidity need.
Flexibility in financial planning : Flexible financial planning provide better opportunity of return.

Answer b)A investment planner always design the portfolio according to the need and situation of client. This very crucial to understand all the need in order to arrive at correct recommendation on financial planning for client in such distress condition.

Some immediate information may be

Current debt obligation (loan payment)
source of any additional income ( support from any other family member)

Answer c) Situation of job loss not only impact the sources of regular income but also impact on investment method.The immediate action can be on reduction of person expenses.

priority to reduce exposure to risky asset.
Prefer to make investment in liquid fund or asset.
try to create a corpus to take care of all types of need for longer period
try to liquid investments made in equity or other risky asset class.

jeff jeffy answered 5 months ago

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