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2012 CFP > Process & Misc Factoids > Flashcards

Process & Misc Factoids Flashcards

1
Q

What is the personal equivalent to a business balance sheet?

A

Statement of financial position

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2
Q

What are the steps to the financial planning process?

A

EGPRIM or EGADIM

1) Establish Scope
2) Gather Info
3) Process or Analyze
4) Recommend or Develop
5) Implement
6) Monitor

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3
Q

Practice Standard 100-1

A

Establish scope

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4
Q

Practice Standard 200-1

A

Determine personal and financial goals and priorities

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5
Q

Practice Standard 200-2

A

Obtain quantitative info and statements

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6
Q

Practice Standard 300-1

A

Analyze data

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7
Q

Practice Standard 400-1

A

Identify and analyze planning alternatives

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8
Q

Practice Standard 400-2

A

Develop recommendations

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9
Q

Practice Standard 400-3

A

Present recommendations

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10
Q

Practice Standard 500-1

A

Agree on implementation responsibilities

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11
Q

Practice Standard 500-2

A

Select products and/or services for implementation

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12
Q

Practice Standard 600-1

A

Define monitoring responsibilities

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13
Q

Code of Ethics and Professional Responsibility

A

IOCFCPD - “Icing On the Cake Forced the Cat to Puke and Die.”

Integrity
Objectivity
Competence
Fairness
Confidentiality
Professionalism
Dillegence
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14
Q

What is the personal equivalent to a business income statement?

A

Cash flow statement

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15
Q

What is the minimum size of an emergency fund?

A

3 months of expenses (minus taxes and savings)

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16
Q

Max debt load for housing

A

28% of GROSS. Includes PITI & HOA

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17
Q

Max debt load (ALL)

A

36% of GROSS

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18
Q

Max consumer debt

A

20% of NET

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19
Q

What is quantitative data?

A

Names and numbers

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20
Q

What is qualitative data?

A

Lifestyle (risk tolerance, health,expectations, etc.)

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21
Q

What is liquidity or current ratio?

A

Current assets / current liabilities

Should be 2 or higher

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22
Q

Acid test or quick ratio

A

(Cash & CE) / current liabilities

should be 1 or higher

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23
Q

Age restriction for reverse mortgages

A

62

24
Q

Lifetime learning Credit max amount

A

$2000….20% of $10,000

25
Q

American Opportunity Tax Credit details

A

Max is $2,500 (100% of first 2K, 25% on next 2K)

For first 4 years of college

26
Q

Who is an investment advisor?

A

A-B-C test

Gives Investment ADVICE
Is in the BUSINESS of giving advice
Gets COMPENSATION

27
Q

What are the exceptions (not considered investment advisors) that don’t have to register?

A
  • banks or holding companies
  • LATE (lawyer, accountant, teacher, engineer)
  • broker or dealer where advice is incidental and receive no special compensation
  • publishers
  • give advice only on US securities
28
Q

What are the exemptions or those that are investment advisors BUT DON’T have to register?

A
  • all clients in home state AND NO LISTED securities
  • clients are insurance companies
  • fewer than 15 clients and don’t act like advisors
  • qualified charitable organizations
  • works only with church plans
  • registered commodities futures trader that doesn’t give advice
29
Q

When does a brochure need to be provided to client?

A

48 hours before contract

OR

At contract signing IF client can cancel in 5 days

30
Q

When do you you register with the FED?

A
  • are an investment advisor
  • manage $100 million or more (flexibility up to 150 M)
  • no state registration available
31
Q

What is FINRA?

A

Financial Industry Regulatory Authority which was established in 2007 when the NASD and parts of the NYSE

32
Q

CFP rules of conduct categories

A
  • defining relationship with clients
  • information disclosed to prospects & clients
  • prospect & client info and property
  • obligation to the public
  • obligation to employer
  • obligation to CFP Board
33
Q

CFP disciplinary actions

A

1) private censure
2) public letter of admonition
3) suspension
4) revocation

34
Q

Maximum length of CFP Board suspension?

A

5 years

35
Q

Securities Act of 1933

A

Primarily deals with rules for new issues (IPOs)

36
Q

Securities Act of 1934

A

Established SEC

Deals with exchanges (secondary markets)

37
Q

Glass-Stegall Act (1933)

A

Prohibited commercial banks from acting as investment bankers. Mostly repealed in 1999 by Gramm-Leach-Biley Act

38
Q

FINRA Notice to Members 94-44 & 96-33

A

Can’t sell away from firm

39
Q

Rule 204A-1

A

Code of ethics instituted for Investment Advisor’s Act

40
Q

CFP Board view on commission

A

As long as you follow the rules they don’t care how you are paid. If there is a conflict of interest….focus on disclosure.

41
Q

CFP Board view of fiduciary standard

A

One who acts in the utmost good faith in a manner the he reasonably believes is in the best interest of client (which may or may not be ion the interest of the certificant)

42
Q

CFP Board engagement form

A

Denotes the process of determining how an individual can meet life goals through proper management of financial resources.

43
Q

CFP Board difference between objectivity and fairness

A

Fairness is putting others feelings first, objectivity is the ability to maintain judgement regardless of circumstance

44
Q

CFP Board written agreements must have 4 parts:

A

1) parties
2) date of agreement and length of service
3) how is it terminated
4) scope of work

45
Q

How long do you have to tell CFP Board about suspension?

A

10 calendar days

46
Q

How long do you have to tell the CFP Board of contact info?

A

45 days

47
Q

What does the CFP Board consider financial planning?

A

They consider:

1) clients understanding of CFP
2) the degree of multiple subject areas
3) the comprehensiveness of data gathering
4) breadth and depth of recommendations

48
Q

What does the CFP Board NOT consider planning?

A

1) open account
2) KYC questions
3) solely providing brokerage or insurance services
4) seller of specific product
5) mortgage only
6) tax returns only
7) teacher of finance

49
Q

CFP Board grounds for discipline:

A

1) violation of code of ethics and professional responsibility
2) fails to comply with practice standards
3) violates criminal law
4) suspension of license
5) violates disciplinary rules & procedures
6) fail to respond to a request by disciplinary and ethics commission
7) obstructs performance of d&e commission
8) lying

50
Q

How long do you have to respond to a CFP notice of investigation?

A

Within 30 days

51
Q

What do you have to do if you get a Complaint and Notice of Hearing?

A

1) answer within 20 days

2) submit documents and $750 (hearing fee) within 30 days

52
Q

How long is the attorney and witness identification process for a CFP hearing?

A

The 45 days before the hearing

53
Q

How long does a decision take in a CFP hearing?

A

Within 30 days of hearing

54
Q

How long can you appeal a decision in a CFP hearing?

A

Anytime within 30 days of decision order

55
Q

Max time of CFP suspension

A

5 years

2012 CFP (7 decks)

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