General Financial Planning Principles, Conduct and Regulations Flashcards
(68 cards)
1
Q
Financial planning subject matters include
A
- Financial statement prep
- Insurance planning and risk mgmgt
- Employee benefits planning
- Investment planing
- Income tax planning
- Retirement planning
- Estate planning
2
Q
Is a client’s expectations about financial planning is enough to consider if it has occurred?
A
True
3
Q
The following are NOT areas of financial planning
A
- Completing account opening paperwork
- Acting as an order taker
- Engaging solely in sales activity related to insurance products
- Acting as a mortgage broker
- Completing tax returns
- Teaching a financial class or contin ed class
4
Q
A financial planning letter of engagement entails:
A
- defines the legal relationship
- parties to the agreement
- date and duraiton
- how and on what terms they can terminate
- services to be provided
5
Q
Six-step financial planning process:
A
- Esablish and define client planner relationship
- Gather info to fulfill engagement
- Analyze and evaluate client’s current financial status
- develop and communicate recommendations
- implement
- monitor
(have to practice all with professional and regulatory standards)
6
Q
Current Ratio
A
CA/CL (one year time frame for both) - should be 1-2
7
Q
Consumer Debt Ratio
A
non-housing monthly debt/monthly net income (should not exceed 20%)
8
Q
Housing cost ratio:
A
all monthly nondiscretionary costs / monthly gross income (should not be 28%)
9
Q
Debt to income
A
all monthly debt payment and housing costs / monthly gross income (not to exceed 36%)
10
Q
American Opp Tax Credit
A
- 100% of first $2k of qual expenses, plus 25% of next $2k
- Max is $2.5k if there are $4k of qual expenses
- can’t be room and board
- at least half time student
- phase out $160-180k joint; $80-90k otherwise
- can get refund for amount if they otherwise owe no taxes
11
Q
Lifetime Learning Credit
A
- $2k per year reimbursement for qualified tuition and related expense per family
- Must spend $10k on such expenses
- 20% factor of expenses (hence $2k limit on $10k)
- Phase out joint $112-132; otherwise $56-66
12
Q
Employer Educational Assistance Program
A
- employer can reimburse upt o $5,250 per yer
- Can’t claim AOTC or LLC for same expenses
- If has above $5,250 in expenses, can claim credit for additional amount
13
Q
Deduction for student loan interest
A
- Interest is above-the-line adjustment to AGI
- Max is $2.5k per year
- Phaseout single 65-80 modified AGI; joint $135-165k
14
Q
Can you contribute property to a 529?
A
NO
15
Q
529 contributions can be treated as though they were made ratably over 5 years T/F
A
True
16
Q
To be eligible for putting line item on statement of financial position, asset or liability must have the follow characteristics:
A
- A/L is fixed and determinable amount
- Receipt or payment not contingent on occurrence of particular event
- Receipt or payment does not require future performance of a service
17
Q
How to construct a budget:
A
- Create/compile financial documents
- Calc each expenditure as % of GI
- ID expenditures subject to inflationary pressures
- Forceast next years income on monthly basis
- determine timing of expenditures
- project budget for two months
- compare actual to expected
- continue monitoring, analyzing
18
Q
What is the only rate the FEd controls?
A
Discount rate
19
Q
Max suspension period for the CFP marks is ____ years
A
5 years
20
Q
A felony conviction for a non-violent crime, including perjury, within the last 5 years is presumed to be unacceptable and will bar an individual from becoming certified unless_____
A
they petition and the Commission grants a special exception
21
Q
Do you pay down a credit card or establish an emergency fund first?
A
Emergency fund
22
Q
The length of debt should not exceed the ____ of the asset
A
economic life
23
Q
Mortgage payments consist of PITI, meaning:
A
principal
interest
taxes
insurance
24
Q
For a revocable trust, $250k is FDIC insured per bene, if the trust has more than $1.25M in assets, then FDIC is the greater of ____ or the $250k limit x the number of benes (only if there are ___ or more)
A
greater of the $1.25M or the $250k x benes if more than 5 benes
25
Earnings from loan interest and investments from a credit union are paid to the ____ in the form of ____
paid to the members in the form of dividends
26
the NCUSIF is the same as the FDIC for _____
credit unions ($250k insured)
27
If a QTP is transferred to a relative in a lower generation, is gift tax incurred?
YES
28
Interest distributed from series EE bonds used for qualifying educational expenses is _____
tax exempt
29
Federal Pell Grants are considered ______ to the recipient
outright gifts
30
Federal Supplemental Educational Opportunity Grants (SEOG) are made to undergraduates with ____ financial need
exceptional
31
Federal Perkins Loan Program have a fixed ___% interest rate, deferred repayment, ___ month grace period, and ___ year repay period
5%, 9 month grace period, 10 year repay period
32
Federal College Work-Study Program means that students work ___ to ___ hours a week to earn part of their financial aid
10-15 hours
33
Federal PLUS Loans are not made on the basis of _____ and allow parents of undergraduates to borrow the _____ of education; repayment must begin within _____
not made on a needs basis, allows parents to borrow total cost, must begin repayment within 60 days of disbursement
34
Subsidized Federal Stafford Loans are based on _____ and the gov't pays the ___- while still in college
based on need and gov't pays the interest while still in college
35
Unsubsidized Federal Stafford Loans allows students to ____ the interest while in college
capitalize
36
Quantity demand tends to fall as price rises for two reasons:
1. substitution
| 2. income effect - when prices rise you tend to consume less
37
The main force determining supply is _____
profit
38
Factors influencing supply are:
```
COGS
technology
input prices
prices of related goods
gov't tax incentives and other special influences
```
39
A good is elastic when the quantity demanded responds ______ to price changes
greatly
40
In general, unanticipated inflation redistributes wealth from ____ to ____
creditors to debtors
41
Inflation affects the real economy in _____ and _____
total output and economic efficiency
42
In economics, there is no necessary relationship between _____ and ____
prices and output
43
The GDP deflator is a _____ price index than CPI
broader
44
The PPI is the Producer Price Index and measures the average change over time in selling prices received by _____ of goods and services
domestic producers
45
The Fed Reserve has the following tools to affect monetary policy
- reserve requirements
- fed reserve discount rates
- open market operations
46
The real rate of return calc =
((1+ nominal rate)/(1+ inflation rate)-1)x100
47
Securities Act of 1933 is primarily concerned with ______ of securities
NEW issues
48
Security offerings that are exempt from SA of 1933 are:
intrastate offerings
munis
offerings of limited size
private offerings to limited number of persons
49
Glass-Steagall Act established the _____ and prohibited (i) commercial banks from acting as _____ and (ii) commercial banks from paying _____ on _____
established FDIC; banned commercial banks from doing investment banking and paying interest on demand deposits
50
SEA 1934 established the ______ and is primarily concerned with ____- of securities
established the SEC and is primarily concerned with secondary markets of securities
51
The Investment Company Act of 1940 requires registration with the _____ and restricts activities of investment companies (including mutual funds)
reg with the SEC
52
Maloney Act of 1938 brought the _____ market under regulation of the SEC
OTC
53
Federal Bankruptcy Act of 1938 requires that a ______ oversees the affairs of a firm in bankruptcy
court-appointed trustee
54
Investment Advisers Act of 1940 mandates that RIAs with over ____ register with the SEC
$100M
55
McCarran Ferguson Act of 1945 clarified that insurance is to be regulated at the ____ level
state
56
SIPA of 1970 established _______
SIPC
57
Financial Services Modernization Act of 1999 repealed sections of the _____ Act and allowed for cross-ownership
Glass Steagall ACt
58
Sarbanes-Oxley Act of 2002 reformed ______ and formed an oversight board for auditing
reformed corporate responsibility
59
Dodd-Frank 2010 was aimed at increasing _______ and corporate _____
increasing consumer protection and corporate reform
60
Organizations that are excluded from the definition of "investment adviser":
banks and bank holding companies
lawyers, accountants, engineers, or teachers (if incidental)
brokers or dealers
publishers of bona fide newspapers
persons whose advice is related only to securities that are directly backed by the US
incidental practice exception
61
Exemptions for "investment advisers" are
```
intrastate adviser
only have insurance companies
foreign private advisers
charitable orgs and plans
commodity trading advisers
private fund advisers
venture capital advisers
advisers to small business investment companies
```
62
Potential common law liability for financial planners/clients
1. by breach of contract
2. by negligence
3. by fraud
63
The following debts cannot be discharged under chapter 7 bankruptcy:
```
back taxes up to 3 years
debts associated with fraud
alimony and child support
debt to to international tort claims
student loans
consumer debts of more than $650 for luxury goods/services owed to creditors within 90 days of order for relief
```
64
The economic and resource approach to counseling says that clients are assumed to be _____ and will change to the most favorable behavior
rational
65
The classical economics approach to counseling assumes that clients choose among alternatives based on objectively defined _____ analysis
cost-benefit
66
The strategic management approach to counseling assumes that a client's goals and objectives drive the ______ relationship
client-planner
67
The cognitive-behavioral approach to counseling assumes that a clients ____, ____ and ____ influence their behavior
attitudes, beliefs, and values
68
The code of ethics principles are:
```
integrity
objectivity
competence
fairness
confidentiality
professionalism
diligence
```
