Chapter 3: Client Profiles & Financial Planning
This chapter covers the Client Investment Recommendations and Strategies (30%) section of the Series 66 exam, focusing on understanding clients and their financial planning needs.
What You'll Learn
| Unit | Topic | Key Concepts |
|---|---|---|
| 14 | Client Types | Individuals, sole proprietorships, business entities, trusts, estates, charities |
| 15 | Client Profile | Financial goals, risk tolerance, time horizon, nonfinancial considerations |
| 16 | Tax Considerations | Individual income tax, corporate/trust taxation, estate and gift tax |
| 17 | Retirement Plans | IRAs, Solo 401(k), qualified plans, nonqualified plans |
| 18 | ERISA Issues | Fiduciary duties, Section 404(c), IPS, prohibited transactions |
| 19 | Special Types of Accounts | 529 plans, Coverdell ESAs, UTMA/UGMA, HSAs/FSAs |
| 20 | Ownership and Estate Planning | Ownership transfer, POD/TOD, beneficiaries, trusts, wills, QDROs, donor advised funds |
Why This Chapter Matters
At 30% of the exam, Client Recommendations is the second-largest section. The exam tests whether you can assess a client's situation and make appropriate investment recommendations. You need to understand different client types, how to gather and analyze their financial data, and how tax rules, retirement plans, and estate planning tools affect investment decisions.
Exam Strategy
Focus on:
- Client profiling: Matching investment recommendations to risk tolerance, time horizon, and goals
- Tax treatment: Capital gains rates, tax-advantaged accounts, and municipal bond tax benefits
- Retirement plan rules: Contribution limits, distribution rules, and the difference between qualified and nonqualified plans
- ERISA fiduciary duties: Know what constitutes a prohibited transaction
- Estate planning: Transfer-on-death vs. probate, revocable vs. irrevocable trusts