Dank Gen Prin Review

Question 1

Financial Planning engagement - written or unwritten?

Answer 1

Written

Question 2

Financial Planning process - 7 steps or more

Answer 2

Not limited to 7 steps

Question 3

Qualitative data?

Answer 3

Anything subjective - based on attitudes, emotions and desires) (ex. Health Status)

Fam Info, trustees, others advisors(objective - Quantitative)

Question 4

Frequency of monitoring financial plan?

Answer 4

As determined by cline and planner

Question 5

Difference between planning steps and planning subject areas?

Answer 5

Planning steps -7 step process
Planning subject areas - 8 planning

Question 6

Retirement age - Quantitative or qualitative?

Answer 6

QUALITATIVE

Question 7

Self attribution bais

Answer 7

Overconfidence
Belief that profits are rooted in investor skills while losses are simply the result of bad luck

Question 8

Media bias

Answer 8

Framing bais - believe based on how things are framed

Question 9

Reflection Bais

Answer 9

Confirmation bias

Question 10

Heuristic

Answer 10

Shortcuts for decision making

Question 11

Overreaction

Answer 11

Over the top, immediate action

Question 12

Mental accounting

Answer 12

View money from different sources in different ways

Question 13

Health status affects what parts of the plan?

Answer 13

Retirement
Life insurance
Disability Insurance
Estate tax consequences (based on life expectancy)

Question 14

Non-Sales related competitions

Answer 14

Custodial and admin fees that are not based on size of clients assets or quantity of transactions
Solicitation fees
Advisory fees for TAMP

Question 15

When to report firms bankruptcy to CFP?

Answer 15

When you are the control person in the firm

Question 16

Which rulings from DEC can be appealed?

Answer 16

All adverse rullings can be appleaded within 30 days from the date of the adverse rulling; only one opportunity for the appeal

Question 17

SEC RULE SP-F and Privacy Policy

Answer 17

Any privacy policy documents that satisfy the requirements of SEC Rule SP-F fully will satisfy the CFP B’s requirements too; must be reviewed and updated annually if there are any material changes to the privacy policy.

Question 18

Are you considered CPF Professional after passing the exam if you have 3-5 years of financial services experience?

Answer 18

No. You have to complete the ethics declaration and satisfy the CFP board’s fitness standards (which include background check)

Question 19

What’s the definition of FMV

Answer 19

amount at which well-informed buyer is willing to buy from a well-informed seller where neither is compelled to buy or sell

Question 20

Auto Note Balance - On what statement

Answer 20

It’s a libility and so it’s on balance sheet (not cashflow)

Question 21

How much funds do you available for emergency ?

Answer 21

Amount available for emergency = Cash/Cash equivalent(Checking/Savings/MM) - (total fixed + total variable expenses)

Question 22

Emergency fund calculation and checking account

Answer 22

First use checking account to determine funds available emergency (checking account amount - total outflow); use any reamining amount towards emergency. If 0 available, then checking account amount is not available for emergency fund.

Checking account amount is left for monthly outflows first !

Question 23

Rule of Thumb for PITI

Answer 23

PITI should be <= to on 28% of Gross Income

Question 24

Year Debt

Answer 24

includes loan payments + Credit card payments (IT DOSE NOT Include taxes and insurance)

Question 25

what needs to be reduced before emergency fund can be established?

Answer 25

Total Debt (monthly debt/payments)

Question 26

What's a better option ? Reduce consumer debt or establish 6-month emergency fund?

Answer 26

Establish 6-month emergncy fund first ; reduce consumer debt second

Question 27

For clients who are in ambivalent phase, what should you do to help?

Answer 27

Provide education as they are increasingly receptive to learning about potentially negative concequencyes of their behavior.

Question 28

Difference between funding an retirement account from cashflow vs. checking/savings/MM accounts

Answer 28

Funding a retirement account from payroll is considered increase in networth; vs. funding it from checking/mm accounts, the net worth doesn't change.

Question 29

Who regulates brokerage companies

Answer 29

FINRA

Question 30

Insured vs. guaranteed

Answer 30

Bank deposits = INSURED not all bonds are insured Variable annuities = some guarantee Tbills = Guaranteed by US Gov

Question 31

INSURED investment?

Answer 31

Brokerage A/C are insured by SIPC

Question 32

Insurer's liability for broker vs. agent

Answer 32

brokers do not represent insurers. Insurer can repay premium and null contract Agents are reps of insurer .

Question 33

Role of insurance brokers

Answer 33

Not a party to insure contracts; limited authority

Question 34

Fed bankruptcy cap

Answer 34

Cap for Roth and Trad IRA Only Rollover to IRA are exempt (unlimited)

Question 35

Exempt Assets timeframe for bankruptcy exclusion

Answer 35

IRA, education savings account and 529s open within last 2 years may not be excluded from chapter 7 bankruptcy

Question 36

Coverdell esa contra

Answer 36

Max $2000 per child from ALL sources

Question 37

Coverdell qualified expenses

Answer 37

Room and board Uniforms required To / from school transportation Extended daycare program

Question 38

Coverdell and 529 accounts and trust ownership

Answer 38

Can be held in a trust

Question 39

Contra to both 529 and ESA in same year for the same bene?

Answer 39

Allowed

Question 40

Financial aid that's non-need based

Answer 40

Parent PLUS loan

Question 41

Combo of AOTC, LLC, 529 and Coverdell

Answer 41

Any combo of AOTC, LLC and distro for coverdell or 529 are NO GO.. coordination rules apply

Question 42

Leading indicators of inflation

Answer 42

PPI (Producer Price Index leads CPI) Increased demand Fed increases interest rate to control rising inflation

Question 43

Inverted Yeild Curve and Income maximization

Answer 43

Buy short-term debt (short - term rates are higher than long-term rates)

Question 44

4 components of yield curve

Answer 44

Yeild to Maturity Term to Maturity Same Credit Rating / Risk Class / Quality Same Tax Status

Question 45

When you qualify for a mortgage, what test have you already passed?

Answer 45

You can PITI (front end ratio is <= 28%) You have enough gross income to cover your PITI, including real estate tax liability

Question 46

Agency regulating brokerage companies

Answer 46

FINRA

Question 47

High AGI and impact to education funding

Answer 47

Pell Grants out of reach - It's need based, check AGI to see if it's too high AOTC has phase out - check AGI

Question 48

Do we like Credits and 529 going after the same expense $$$$

Answer 48

No. We no likey! Education credits and 529/coverdell cannot be used for same education expenses.

Question 49

What's another name for Discount rate in Monetary policy

Answer 49

Margin requirements

Question 50

Economic indicators

Answer 50

Lucky - S&P 500 Index, Supplier delays, initial unemployment claims Unlucky - The yield curve

Question 51

Defensive Industries

Answer 51

Auto, Food and Pharma ( little sensitivity to business cycle up and down)

Question 52

Best ways to access HO

Answer 52

Reverse mortgage HO loan Sale of hiome Refinance the hi.e mortgage

Question 53

All you have to do before selling equity based securities

Answer 53

1. Find and tie up with BD/FINRA form 2. File U-4 3. Pass securities exams 4. Receive a CRD number Yay... Now you can sell equity based securities!!

Question 54

When you want to become a Registered Investment Advisor, who do you contact first?

Answer 54

Lucky: SEC Unlucky: FINRA

Question 55

FCRA

Answer 55

Fair Credit Reporting Act If you are denied credit, you have a right to know why !

Question 56

Coverdell Pros

Answer 56

* Contributions must be made before bene turns 18 * Contributions are gift of present value * Can invest in individual stocks and bonds * Religious elementary School costs are qualified expenses

Question 57

Comingling client finds in common client investment account

Answer 57

Allowed!

Question 58

Are taxes considered in Emergency Fund calculations?

Answer 58

No. Only fixed and variable expenses are considered!

Question 59

What accounts are available for emergency funds consideration?

Answer 59

Savings, CDs, Money Market

Question 60

Are points added to the refinancing balance

Answer 60

NO. Points are paid, not refinanced