Ific Chapter 1

1890s; first investment funds available to the general public. Consisted of domestic and foreign government bonds and were entirely unmanaged. Their lives were fixed, all securities involved have the same maturity date. At the maturity date, all securities dissolved automatically

1900s; Simply corporations whose business is making investments. The firm would issue shares to investors and use the proceeds to create an investment portfolio. After initial issue of shares, the fund is closed to other investors.

1920s; Unlike close-end funds, mutual fund units are always available from the fund to meet the purchasing demands of investors without restriction. One key difference is that you can buy and sell close-end funds on a stock exchange, while mutual funds are only available through a fund company or financial institution.

Means that all recommendations take into account the clients unique situation and investment objectives, are based on the sales representatives understanding of the clients personal and financial situation, based on the sales representatives understanding of investment products being recommended

States that you must use due diligence to learn the essential facts relevant to every client and every order. Information concerning clients financial status (both income and net worth), family and other commitments, as well as financial goals. If a client refuses to provide information, you cannot perform the order.

1. Financial goals and objectives

2. Financial Circumstances

3. Personal Circumstances

4. Investment Knowledge

5. Ability to tolerate risk

Clients set these with targets in mine, such as "I'd like to retire at 55". Often makes these targets based on factors such as the ability to bear investment risk.

Important in judging suitability of investments, because they determine the amount of savings clients can commit to investing and the level of risk they can assume. The better a clients circumstances, the more risk can be assumed and the better the returns will be in the long run. The clients financial circumstances improve with the size of the investment portfolio, the excess income from employment and investment over living expenses (savings), and the stability of the client's employment situation.

Help determine how much savings a client will have available for investment. Single or married clients may be savers or spenders depending on their lifestyle. But clients with dependents are generally spenders. Older clients tend to be savers.

Varies among clients. Many may be experienced investors, while others may have zero investment knowledge. Investment knowledge differs widely from person to person and is an important determinant of how much investment risk a client can bear. Knowledgeable investors tend to have a better understanding of risk, as well as their own ability to bear that risk.

Is the potential volatility in returns or the range of possible future outcomes in the price of a security. Example are how treasury bills, are virtually risk free, but pay less than derivatives which carry a greater potential for loss.

* Risk Averse

* Risk Tolerant

People who can't tolerate risk

Those willing to assume risk

* Legal

* Ethical

* Professional

Make sure recommendation is suitable for client (goals, financial condition, risk tolerance, personal circumstances, investment knowledge)

Customers needs come first (as opposed to self-sales goals, etc)

Provide the best customer service possible.