A financial advisor gathers the following information about a new client:
·The client is a successful economics professor at a major university
·The client plans to work full time for seven years and then will work part time for 3 years before retiring
·The client owns two homes and does not have any outstanding debt
·The client has accumulated retirement savings of approximately $ 2 million through their employer’s retirement plan and will have anticipated retirement spending needs of $60,000 per year
·The client reads numerous financial publications and follows markets closely
While concerned about the current health of the global economy, the client maintains that he is a long-term investor .
C is correct. The client is in a strong financial situation (stable job, no debt), has a reasonably long time horizon before needing any liquidity (10 years), and reasonable retirement spending needs relative to total assets. These factors indicate a high ability to take risk. In addition, the client’s knowledge of financial markets, experience, and focus on the long term also indicates a high willingness to take risk.