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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Case Studies in Comprehensive Financial Advice

While preparing a comprehensive financial plan for a new client, an investment adviser finds that the client has no term insurance, no emergency fund and a large personal loan. Which action is the most appropriate first step in sequencing the recommendations?

The adviser should first build an emergency fund and arrange adequate insurance cover. These protect the family against shocks and avoid forced selling of investments, so long-term equity investing should follow only after this foundation is in place.

  1. ABuild an emergency fund and arrange adequate risk cover before starting long-term equity investmentsCorrect
  2. BStart a high-equity SIP immediately to maximise long-term growth
  3. CPrepay the home loan before addressing any other need
  4. DInvest the surplus in a PMS product to chase higher returns

Explanation

A sound plan secures the base first: liquidity for emergencies and protection against death or illness. Only then should long-term growth investments be added. Starting equity SIPs or PMS first leaves the family exposed to forced liquidation or uninsured loss.

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