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General Principles Flashcards

(48 cards)

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1
Q

The financial planning process

A
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2
Q

529 or QTP

A

Qualified tuition plan
- 18k per year per child. Can do up to five years at once 90k from one individual

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3
Q

Amortization calc steps

A
  1. 12/py End mode
  2. Solve for PMT
  3. 1, Input, #of months
  4. OS, AMORT, =,=,=
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4
Q

The CFP Board was founded in what year?

A

1985

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5
Q

Within how many days must a CFP inform the CFP Board of an address change?

A

30 days

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6
Q

How many CE hours per reporting period are required?

A

30 hours

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7
Q

The CFP Commission can order a license suspension not to exceed ___ years.

A

5

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8
Q

Responses to complaints shall be in writing and

submitted within ___ calendar days.

A

30

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9
Q

Evidence in support of an investigation may be submitted up to ___ days prior to the scheduled hearing.

A

45

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10
Q

Use of Initials

Registered Investment Advisor and

Certified Financial Planner

A

NO:

  • RIA
  • C.F.P.

YES:

  • Registered Investment Advisor
  • CFP®
  • CERTIFIED FINANCIAL PLANNER®
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11
Q

When can a CFP® licensee release client information to other persons?

A
  • When an attorney or court subpoenas the information
  • At the client’s request
  • As a defense against charges of wrongdoing
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12
Q

Determining the Release of an Emergency Fund

(Use 3 or 6 months if…)

A

3 months if:

  • Single with 2nd source of income
  • Married, both work
  • Married, only 1 spouse works, but have a second source of income ​

6 months if:

  • Single wage earner
  • Married and only 1 spouse works
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13
Q

How much consumer debt is considered acceptable?

A

≤20% of NET income

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14
Q

How much Total Monthly Debt is considered acceptable?

A

≤36% of GROSS income

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15
Q

How much PITI is considered acceptable?

A

≤28% of GROSS income

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16
Q

Current Assets

A
  • Cash Equivalents
  • Marketable Securities
  • Accounts Receivable
  • Inventory
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17
Q

Securities Act of 1933

A

The Securities Act of 1934 was passed to regulate the secondary market (the trading of issued securities). The act also created the SEC to enforce securities laws.

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18
Q

Investment Company Act

of 1940

A

Securities Investors Protection Act of 1970 established the SIPC to supervise securities firms that get into financial difficulties. The SIPC insures investors against losses arising from the failure of a brokerage firm.

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19
Q

College Funding - Phase outs

A

Phase outs given (married filing jointly)

  • Educational Bonds ($145,200 - $175,200)
  • Lifetime ($160K - $180K)
  • American Opportunity ($160K - $180K)
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20
Q

529 Keys
K-12, Student loans?

Study These Flashcards
A
  • Lump sum gift up to $90,000
  • Donor can retain control
  • K-12 for tuition allowed up to $10,000/yr.
  • Can be used to pay student loans ($10,000/student over lifetime)
21
Q

Deductible Housing Interest

Study These Flashcards
A

All mortgages cannot exceed:

  • $750K combined (MFJ) and single
  • $375K (MFS)
  • Home equity interest is only deductible if used for home
    renovation/improvement.
22
Q

Federal Reserve Open Market Operations

Study These Flashcards
A
  • Repos - Fed buys securities = expansionary/easy money policy
  • Reverse Repos - Fed sells securities = contractionary/tight money
    policy
23
Q

Gross Domestic Product (GDP)

Study These Flashcards
A

Total dollar value of all goods and services produced within the US only.

  • GDP counts economic activity without regard to yearly price
    fluctuations.
  • The GDP does not include any income generated outside the US or
    adjustments for foreign currencies.
24
Q

Business Cycle

Study These Flashcards
A
  • Expansion
  • Peak
  • Recession/Contraction
  • Trough
  • Recovery/Expansion
25
Recession vs. Depression
- Recession - Two consecutive quarters of economic decline (negative GDP) - Depression - Six consecutive quarters economic decline (negative GDP)
26
Exceptions to Filing as an Investment Adviser
- Banks that are not also investment companies. - Lawyers, accountants, teachers where advice is incidental. - Broker/dealers or registered reps whose performance is incidental and who get no special compensation for advice. - Publishers of bona fide newspapers. - Those who give advice solely relating to US government securities.
27
Exemptions to Filing as an Investment Adviser
- Advisers whose only clients are insurance companies. - Family office
28
How does an Investment Adviser register with the SEC?
- Initially, file ADV part I and II with the SEC. - Pay minimum filing fee of $150 - RIA must submit part I of ADV and schedule I annually.
29
Financial Industry Regulatory Authority (FINRA) Initial Registration Process
- The individual associates with a broker/dealer. - Registers with FINRA through broker/dealer on form U-4. - Takes and passes appropriate exams. - Is issued a CRD number (Central Registration System)
30
Financial Industry Regulatory Authority (FINRA) Key Examinations/Licenses
- Series 6 - Mutual funds, UITs, and variables (only new UITs) - Series 7 - General securities (including UITs on secondary market) - Series 63 - Uniform Securities Agent State Law Exam - Series 65 - Uniform Investment Adviser Law Exam - Series 66 - Uniform Combined State Law Exam (combines 63 & 65 exams)
31
Basic Components of a Legal Contract as Applied to Insurance
- Offer and Acceptance - Two parties, offerer and acceptor - Consideration - Something of value (money) - Legal Object - Legal in purpose - Competent Parties - Principle must have legal capacity to execute contract: - Intoxicated adults have limited or no capacity - Minors only have capacity to contract for necessities (food, clothing, shelter) - Legal Form - Contract must meet requirements
32
Law of Agency (Insurance)
- Express Authority - Written, explicit direction from principal to agent - Implied Authority - Is that which the public believes the individual holds and includes signage, rate books, etc. - Implied is actual authority that the agent has to carry out the principal’s business - Apparent Authority - Arises out of negligence of the principal in allowing the agent to appear to have authority because of certain actions of the agent in the past. This typically affects terminated agents.
33
Which debts are not cancelable by Bankruptcy?
- Student Loans - Government Loans - Child Support - Alimony - Wage Withholding - FICA Taxes - Income Taxes Due - Rollovers from qualified plans are exempt (unlimited) and non-rollover IRAs up to $1 million are exempt
34
Can you segment planning as a CFP?
Yes. A written agreement should be presented by the planner as the relationship is established.
35
Qualitative data
Addresses attitudes, emotions, and desires.
36
What would knowing the health of a client help with?
- retirement - life insurance - disability - estate
37
When do you need to register as an IA?
Provides advice for compensation to clients in multiples states
38
Initial registration process to sell certain equity products.
1. Associate with broker dealer firm. 2. Register with Ferre through pro dealer on form U4. 3. Passes appropriate exams. 4. Entered into CRD system.
39
To sell on major exchanges what is needed?
Series 7 6 allows UIT (initial offering)
40
What is included in ADV part one? What is including ADV part two?
1. Part one includes the business address and background. 2. Part two spells out the compensation arrangements.
41
Chapter 11 Bankruptcy
For individuals who do not qualify under chapter 13, because they exceed the debt limitations or do not have a regular source of income.
42
Chapter 13 bankruptcy
Re-organization: payments to creditors are typically reduced to be more manageable. Creditors can harass the debtor. The advantage is that the debtor is generally not required to relinquish assets.
43
Chapter 7 bankruptcy
Permitted debtor to claim the federal exemptions for the exemptions available under state law. There are 33 states which have opted out of federal exemptions. Better than 13 or 11
44
In regards to bankruptcy. When does state law trump federal law regarding homesteads?
After 730 days state law trumps
45
When are 529s expert from bankruptcy?
If they were established 2 or more years prior.
46
How much of trad Ira’s protected from bankruptcy?
Up to 1,000,000
47
Express authority aka loyal
Insurance company to agent (in writing)
48
Fair credit reporting act
Those who are denied credit the right to know the reason why

CFP (7 decks)

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