General Principles Flashcards
(33 cards)
Repayment triggers of a reverse mortgage
Death
Conclusion of Term
Absence of homeowner from home for a minimum of 1 year
Types of “Incidental” Advice
BLAT:
Bank or bank holding company, Lawyers, Accountants, Teachers
License to receive commission for selling mutual funds
Series 6 or 7
License to receive commission for selling variable annuities
Series 6 or 7, AND state variable insurance producer’s license
Educational accounts: Creditor protected
Money held in Coverdell or 529 for more than 2 years
Does the CFP Board Publish a Suspension?
Yes, suspensions are automatically published, even if an applicant does not have marks yet.
First meeting with new client, provide them with what?
Written disclosure of all material information
What are the steps in the Financial Planning Process?
- Understand the Client’s Personal and Financial Circumstances
- Identify and Select Goals
- Analyze client’s current course of action & potential alternatives
- Develop financial planning recommendations
- Present financial planning recommendations
- Implement financial planning recommendations
- Monitor progress and update
What does the Securities Act of 1933 primarily address?
New Issues/IPOs
This act requires full disclosure of material information related to securities being offered.
What is the purpose of the Securities Act of 1934?
Regulates the secondary market and created the SEC
The SEC oversees the securities industry to protect investors.
What does the Investment Company Act of 1940 regulate?
Mutual Funds & UITs register with SEC
This act provides guidelines for investment companies to protect investors.
Define Investment Advisor.
Advice, Business, Compensation
Investment advisors provide financial advice in exchange for compensation.
What are the two types of compensation structures for financial advisors?
- Fee-based
- Fee-only
What does a Statement of Financial Position represent?
Net worth = assets – liabilities
This statement provides a snapshot of an individual’s financial situation.
What is the purpose of an Emergency Fund?
To cover unexpected expenses
Recommended amounts vary based on individual circumstances.
What is the recommended emergency fund for a single wage earner?
6 months of expenses
What does PITI stand for in debt ratios?
- Principal
- Interest
- Taxes
- Insurance (property only)
What is a Liquidity Ratio?
Current assets / current liabilities
What does a negative Net Present Value (NPV) indicate?
Investment doesn’t meet your required rate of return
What is the function of the Securities Investor Protection Act of 1970?
Insures against failure of brokerage firms
This act provides coverage to investors in case a brokerage fails.
What is the contribution limit for a Coverdell Education Savings Plan?
$2k total year contribution limit if under MAGI limit
What is the maximum contribution for 529 plans per person per year?
$19k/person/year with 5 frontloading allowed
What are the two types of tax credits available for education expenses?
- American Opportunity Credit
- Lifetime Learning Credit
What is the tax treatment of alimony payments made pre-2019?
Cash payments or payments that pay for debt of payee spouse are taxable
