Portfolio Management Q143

0. A financial advisor gathers the following information about a new client: The client is a famous physics professor at biggest universities in New York. The client owns a penthouse and two cars with currently zero outstanding debt. The client is currently working full-time and plans to continue this way for another five years after which he will work part time for 4 years before retirement. The client has accumulated retirement savings of approximately $1.75 million through their employer’s retirement plan and anticipates retirement spending needs of $80,000 per year. Despite the concern regarding the current condition of the global economy, the client maintains to remain a long-term investor. The client follows numerous financial publications closely and is aware of the evolving markets. Based on the above information, which of the following best describes this client?

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Option : A
Explanation : 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.

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