How does the life-cycle hypothesis assist an advisor while interacting with clients?
A.
It forms part of the ongoing requirements of the Know Your Client rule
B.
It suggests that as clients age they are in a better financial position to take on investment risk
C.
It provides general assumptions regarding investment objectives based on a client's life stage
D.
It identifies a client's current life stage and investment objectives by their age
The Answer Is:
C
This question includes an explanation.
Explanation:
The life-cycle hypothesis suggests that as people move through different life stages, their objectives, financial circumstances, risk tolerance, and investment knowledge change. Advisors can use this framework to make general assumptions about investment objectives based on age and stage (e.g., younger investors focus on short-term goals, older investors on retirement and estate building).
Therefore, the correct answer is C.
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