General Principles Flashcards
(41 cards)
The CFP Board was Founded in what year?
1985
Within how many days must a CFP inform the CFP Board of an address change?
30 Days
How many CE (Continuing Education) hours are required per reporting period (2 years)?
30 Hours
The CFP Commission can order a license suspension not to exceed ___ years.
5 Years
Responses to complaints shall be in writing and submitted within ___ calendar days.
30 Days
Evidence in support of an investigation may be submitted up to ___ days prior to scheduled hearing.
45 Days
Use of initials Registered Investment Advisor and Certified Financial Planner.
NO –> RIA, C.F.P
YES –> Registered Investment Advisor, CFPⓇ, CERTIFIED FINANCIAL PLANNERⓇ
When can a CFPⓇ licensee release client information to other persons?
- When an attorney or court subpoenas the information
- At the client’s request
- As a defense against charges of wrongdoing
Size of Emergency Fund (use 3 months or 6 months if…)
3 Months
-Single, with 2nd source of income
-Married, both work
-Married, only 1 spouse works, but has second source of income
6 Months
-Single wage earner
-Married and only 1 spouse works
How much consumer debt is considered acceptable? (Excluding mortage)
<= 20% of NET Income
How much total monthly debt is considered acceptable?
<=36% of GROSS Income
How much PITI (Principal, Interest, Taxes, Insurance) is considered acceptable?
<=28% of GROSS Income
Current Ratio
Current Assets / Current Liabilities
Current Assets
-Accounts Receivable
-Inventory
-Cash Equivalents
-Marketable Securities
Current Liabilities
-Accounts Payable
-Credit Card Debt
-Taxes Payable
Securities Act of 1933
Companies must register before issuing publicly-traded securities (Required purchasers be provided a detailed prospectus)
Securities Act of 1934
Created the SEC to enforce securities laws. Regulated secondary market of securities.
Investment Company Act of 1940
Authorized SEC to regulate Investment Companies
- Open-End Management Companies → Mutual Funds, Redeemable Securities, Unlimited Offerings
- Closed-End Management Companies → Exchange Tradable, Non-Redeemable, Limited Offerings
- Unit Investment Trust (UIT) → Fixed portfolio (Stocks, Bonds, Redeemable units) for specific periods of time
- Variable products (Certificate Companies) → Issues Debt Securities to Investors
Securities Investors Protection Act of 1970
Established SIPC to supervise securities firms that get into financial difficulties. SIPC insures investors against losses arising from the failure of a brokerage firm. (250K-Cash, 500K-Total)
College Funding (Credit Impact)
- Educational EE Bonds: ($145,200 - $175,200 MFJ)
- American Opportunity Credit: ($160K - 180K MFJ)
- Lifetime Learning Credit: ($160K - 180K MFJ)
Educational EE Bonds:
* Bond interest tax-free if used for education
American Opportunity Credit: (Partially Refundable)
* $2,500/year/student (up to 4 years) → 100% of first $2000 and 25% of next $2000
* Tuition and Fees, Course and Materials (Not Room & Board) → At Least Half Student
* MUST CLAIM STUDENT AS DEPENDENT AND CAN APPLY TO MULTIPLE STUDENTS
Lifetime Learning Credit: (Non-Refundable)
* 20% of Qualifying Expenses (Up to 10,000/year) → Max $2000
* Tuition and Fees (Not Course and Materials and Room & Board)
* Same student cannot claim AOC and LLC in same year
529 Keys
Set up through state grants tax-free growth and tax-free withdrawals (Education ROTH IRA)
* Lump Sum gifts up to $90K/180K (Single/MFJ) (5-year election >18K * 5)
* K-12 for tuition allowed up to 10K/yr
* Can pay student loans (10K/student over life)
* Donor can retain controls (Money Treated Like Completed Gift)
* Change beneficiary at any time
* Can roll in ROTH IRA
Deductible Housing Interest
-Which Mortages/Homes are applicable?
All mortgages must be on primary or secondary home and cannot exceed
-$750K –> MFJ and Single
-357K –> MFS
-Home equity interest is deductible if used for home renovation/improvement
Federal Reserve Open Market Operations
Buy/Sell Treasury Bills to include amount of money in economy (Influences Federal Funds Rate)
* Repos → Fed buys securities, increase discount rate, decrease corp tax rate, increase budgets = expansionary/easy money policy (Lower Interest Rates)
* Reverse Repos → Fed sells securities, decrease discount rate, increase corp tax rate, decrease budgets = contractionary/tight money policy (Raise Interest Rates)
Gross Domestic Product (GDP)
Total dollar value of all goods and services produced in the US only
-GDP counts economic activity without regard to yearly price fluctuations
-GDP does not include any income generated outside the US or adjustments for foreign currencies
