You are an investment planner with Grow Your Wealth Inc. You are licensed to sell mutual funds, and Exchange Traded Funds (ETFs). A prospectiveclient has come to you seeking your advice and has the following profile:

Age 55. Female. Single. RRSPs - $500,000, Non-registered account - $400,000. TFSA - $100,000. Total overall portfolio is therefore $1,000,000. She is retiring at the end of 2021, lives modestly and needs $35,000 of cash flow a year from her portfolio. All accounts are in cash as she had her previous advisor liquidate everything so she could manage the accounts on her own.

She has changed her mind and realizes she could use professional management. She wants to know whether you will build her portfolio using mutual funds or ETFs. You have suggested an overall asset allocation with a 35% weighting in bonds and 65% in stocks (equities).

 

A) Please explain which product solution you will recommend (mutual funds or ETFs) and defend your recommendation. Provide 3 reasons. 3.0 marks/ 3 reasons / explained

B) The prospective client's friend has suggested investing 100% of the equities in U.S. companies (either a mutual fund or an ETF that replicates the S&P 500).

What risk/downside do you see about this suggestion? Provide 2 examples. 2.0 marks

Answer rating: 100% (QA)

Investment Recommendation for Retiree Client A Product Recommendation Exchange Traded Funds ETFs While both mutual funds and ETFs can be suitable tool... View the full answer