medium · Certified Financial Planner Professional Conduct
The Patel household recently inherited 850,000 from a distant relative's estate. Mr. Patel is eager to pay off their320,000 mortgage at 6.8% and invest the remainder in a diversified equity portfolio to 'finally get ahead.'
According to the Practice Standards, what is the planner's most appropriate next step?
- Calculate the net present value (NPV) of the mortgage acceleration versus the expected return of the equities.
- Collaborate with the Patels to identify and prioritize their specific financial goals and life objectives.
- Recommend the mortgage payoff first because a guaranteed 6.8% return outranks market risk.
- Advise the Patels to park the funds in a high-yield savings account for a six-month 'cooling off' period.
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