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An investment advisor knows his ABC’s!

An investment adviser is defined for purposes of the Investment Advisors Act of 1940 as someone who is:

(1) of providing Advice about securities

(2) in the Business

(3) for Compensation.




TABLEs are incidental!

The most important rules are the first two Exceptions to Registration with the SEC.






Whose advisisory services/advice is solely Incidental to their business profession.


VIPs are SaFE from exemptions

The following meet the definition of investment advisor, but are not required to register. They are subject to the anti-fraud provisions of the Act.

Venture capital

Insurance companies

Private funds less than $150 million

home State

Foreign advisors

securities not on a national Exchange


1, or 2, 3, 4 test!

To be an accredited investor you must meet the 1, or 2, 3, 4 test!

$1 million reviewed at least every 4 years, or

$200,000 of income if single, or

$300,000 of income if married.


What are the opportunities and threats to the external environment to the individual during Financial Planning?

- Economic Factors – GDP, Inflation, Interest Rates.
- Social Factors – Customs, Beliefs, Status Symbols.
- Political Factors – Forms of Government, Protectionism.
- Legal Factors – Antitrust Acts, Consumer Protection.
- Technological Factors – Current & New Technology.
- Taxation Factors – Income, Property, Payroll, Sales Tax.


What causes a shift in the Demand Curve

 increase or decrease in:

- Income.
- Taxes.
- Savings Rate.
- Disposable Income.


What causes a shift in the Supply Curve?

The supply curve will shift to the left or right because of a change in:

- Technology.
- Competition.
- Anything other than price.


Property Exempt from Chapter 7?


life insurance

qualified plans


Steps for ROI using average invested assets?

ROI = (Ending Investments – Beginning Investments – Savings – Gifts Received) / (Average Invested Assets)
Average Invested Assets = (Beginning Investments + Ending Investments) / 2


What are the main types of financial aid offered by the Department of Education?


  1. Federal Pell Grant
  2. Stafford Loan
  3. PLUS Loan (Parent Loans for Undergraduate Students)
  4. PLUS Direct (Grad PLUS loan for Graduate Students)
  5. Federal Perkins Loan Program


What types of financial are need based or not need based?

Need Based

Federal Pell Grant

Subsidized Stafford Loan

Federal Perkins Loan Program

Not Need Based

Unsubsidized Stafford Loan

PLUS Loan (Parent Loans for Undergraduate Students)

PLUS Direct (Grad PLUS loan for Graduate Students)


What are the coordination rules for the American Opportunity and Lifetime Learning Credit?

  • An individual may claim an American Opportunity Tax Credit or Lifetime Learning Credit in the same year as a distribution from a 529 Plan, just not for the same expenses.
  • An individual may not claim both an American Opportunity Tax Credit and Lifetime Learning Credit for the same child, in the same year.
  • An individual may not use an American Opportunity Tax Credit or Lifetime Learning Creditf for the SAME expense paid by a qualified tuition program.
  • An individual may use the American Opportunity Tax Credit or Lifetime Learning Credit in the same year a distribution from a qualified tuition plan, just not the same expenses.


What are important considerations for education savings vehicles?

When determining which savings vehicle is most appropriate to recommend, they may give you the client’s AGI and you can eliminate choices based on their income. The single and married filing jointly phaseout limits for Coverdell Education Savings Accounts, American Opportunity Tax Credits (Hope) and Lifetime Learning Credits are provided on your exam formula sheet.


Insurable Risks are CHAD

  • not Catastrophic
  • Homogeneous exposure units
  • Accidental
  • measurable and Determinable.


A legal contract requires COALL!

Competent parties

Offer and Acceptance

Legal consideration, and

Lawful purpose



Don’t Insure Everything (Squared)

1. Determine the objectives of the risk management program.
2. Identify the risks to which the client is exposed.
3. Evaluate the identified risks as to probability of occurrence and potential loss.
4. Determine alternatives for managing risks, and select the most appropriate alternative for each.
5. Implement the program.
6. Evaluate, monitor, and review (control).


dividends are a CRAP-O

  • Cash option
  • Reduce premiums
  • Accumulate at interest
  • Paid-up additions, and
  • One-year Term


What are the Life Insurance Nonforfeiture Options?

  • Cash Surrender Value: Cash Value less surrender charges
  • Reduced Paid-up Insurance: insured receives CV in form of paid-up policy with smaller face amount
  • Extended Term Insurance: insured receives the cash value in the form of a paid-up policy for a specified duration, with same face amount as original policy


What is the tax deductibility of Group Term Life insurance premiums?

Premiums are not deductible for the insured, but premiums are deductible by the employer for group life insurance and those premiums are taxable income to the employee.


What do you need to know about annuities and the year 1982?

  • For annuities after 1982 and premature withdrawals, the withdrawal receives LIFO tax treatment.
  • Any annuity prior to 1982 receives FIFO tax treatment.


What are the main COBRA Coverage times?

  • 18 months for a reduction in hours or normal termination
  • all others are 36 months.
    • If CFP Board tests any event other than a reduction in hours or normal termination, then it will be 36 months.
    • All catastrophic events qualify for 36 months ofCOBRA coverage.


Taxation of Disability Benefits

  • If EMPLOYEE pays the premium with AFTER-TAX dollars: - Premiums are Not Deductible; - Benefits ARE Tax Free.
  • If EMPLOYER pays the premium: - Premiums ARE Deductible to Employer - Benefits to Employee ARE TAXED
  • If EMPLOYEE pays premium with PRE-TAX dollars (cafeteria plan): - Benefits to employee ARE TAXED.


Types of Insurance Policies

  • Basic and broad policies are “named perils” polices. Losses resulting from perils not specifically “named” are not covered.
  • An open perils (or “all-risks) policy covers “all perils” except those that are specifically excluded.


Taxation of Social Security Benefits

  • Know the ways that retirement benefits can be reduced or taxed.
    • Up to 85% of benefit may be taxed.
  • - Thresholds are based upon Combined Income.
  • Combined Income includes:
    • AGI
    •  Nontaxable interest.
    • Foreign earned income.
    • 1/2 of retirement benefit


what is NOT covered by Medicare Part B?

Does not cover:

- Dental care, dentures.
- Cosmetic surgery.
- Hearing aids.
- Eye exams.


Does the NAIC regulate the insurance industry?

the NAIC has no regulatory power over the insurance industry. Regulation occurs at the state level.


What is the age for catch up contributions to an HSA?

Remember that the catch-up contribution for HSAs is for those 55 and older, not the typical 50 and over we see for IRA catch-up contributions.


What is the HSA Penalty?

Remember that the penalty for non-qualified medical expense distributions ends at 65, not 59 1⁄2 like the rules for qualified plans and IRAs.


What is important to remember about HIPAA?

Although the Affordable Care Act prevents policies from containing preex-isting condition clauses for policies issued after September 2010, we are still advising students to be familiar with HIPAA rules in the event the topic appears on the exam.

Chart P. 166


What is the rule of thumb on covered losses?

Losses must result from something that is “sudden and accidental.” Losses associated with neglect and intentional acts ofthe insured are not covered