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Review Introduction and Fundamentals Lecture Flashcards

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1
Q

What is the Dalton Review’s #1 goal?

A

To help you pass the CFP® exam by focusing on the most testable material and active participation

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2
Q

How many times can you take the CFP® exam in your lifetime?

A

5 times total; no more than 3 times in 24 months, then a 1-year sit-out

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3
Q

How is the CFP® exam structured?

A

170 questions, 6 hours (two 3-hour sessions), 40-minute break

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4
Q

What are the main content areas and their weightings?

A

Professional Conduct/Regulation (8%), General Principles (15%), Risk Management/Insurance (11%), Investment Planning (17%), Tax Planning (14%), Retirement Planning (18%), Estate Planning (10%), Psychology of Financial Planning (7%)

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5
Q

What is “financial advice” under CFP Board standards?

A

Any communication that would reasonably be viewed as a recommendation for a client to take or refrain from a particular financial action.

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6
Q

What is “financial planning”?

A

A collaborative process maximizing a client’s potential to meet life goals through integrated financial advice

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7
Q

When is a client first engaged with a CFP® professional?

A

When the client first relies on the practitioner’s advice.

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8
Q

List the six principles of the CFP® Code of Ethics.

A

Honesty, Integrity, Competence, Diligence, Client’s Best Interests, Due Care, Avoid/Disclose Conflicts, Confidentiality, Reflect Positively on Profession.

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9
Q

What is the continuing education requirement for CFP® certificants?

A

30 hours every two years, including 2 hours of ethics.

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10
Q

What are the three main areas of CFP Board Professional Standards?

A

Code of Ethics/Standards of Conduct, Fitness Standards, Enforcement

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11
Q

What are the three components of the CFP® fiduciary duty?

A

Duty of Loyalty (client’s interests first), Duty of Care (prudent professional), Duty to Follow Client Instructions (reasonable/lawful)

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12
Q

What must be disclosed and managed regarding conflicts of interest?

A

Compensation, limited product set, proprietary funds, referrals; must avoid or fully disclose and manage conflicts.

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13
Q

When is commingling client assets allowed?

A

Only if given explicit written authorization, properly tracked, and permitted by law

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14
Q

When can you describe yourself as “Fee Only”?

A

Only if neither advisor nor firm receives or can receive sales-related compensation

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15
Q

What are the seven steps of the financial planning process?

A

Understand client’s circumstances

Identify/select goals

Analyze current/alternative actions

Develop recommendations

Present recommendations

Implement recommendations

Monitor/update plan

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16
Q

What types of information are gathered in step 1, Understand client’s circumstances?

A

Qualitative: health, values, goals, attitudes

Quantitative: age, assets, liabilities, income, expenses

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17
Q

Who is responsible for implementing and monitoring the plan?

A

The CFP® professional, unless specifically excluded by the engagement scope

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18
Q

What are effective communication techniques for planners?

A

Pacing, rephrasing, reflecting, and using a mix of words, numbers, and graphics

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19
Q

What are the three learning styles?

A

Visual, auditory, kinesthetic

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20
Q

What is an “absolute bar” to certification?

A

Felony convictions for fraud, theft, violence, or other serious crimes; professional discipline for intentional fraud/theft

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21
Q

What conduct renders an applicant “currently ineligible”?

A

Current professional license bar, suspension, or regulatory disqualification

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22
Q

What conduct requires a petition for fitness?

A

Lesser professional discipline, certain misdemeanors, bankruptcy, tax liens, or multiple client disputes

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23
Q

When must an advisor register with the SEC vs. the state?

A

<$100M: state; >$110M: SEC; $100–110M: choice

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24
Q

What is Form ADV?

A

SEC registration form: Part 1 (firm info), Part 2 (client brochure), Part 3 (relationship summary/CRS)

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25
Who is exempt from RIA registration?
Banks, incidental B/Ds, lawyers/accountants/teachers/engineers (incidental advice), publishers, advisers to insurance companies, private funds <$150M, in-state advisers not advising on national securities, foreign advisers without US office
26
What does FDIC insurance cover?
$250,000 per depositor, per account ownership type, per bank; covers checking, savings, CDs, certain retirement accounts.
27
What is not covered by FDIC insurance?
Money market mutual funds, stocks, bonds, mutual funds.
28
What debts are not discharged in Chapter 7?
3 years of back taxes, alimony, child support, most student loans.
29
What assets are protected in bankruptcy?
Rollover IRAs (unlimited), IRAs/Roth up to ~$1.3M, pensions, life insurance, annuities.
30
What is the formula for net worth?
Assets – Liabilities = Net Worth.
31
What is the current ratio?
Current Assets / Current Liabilities
32
What is the emergency fund ratio?
Current Assets / Monthly Nondiscretionary Expenses (target: 3–6 months).
33
What are the recommended debt ratios?
Housing ≤ 28% of gross income; Housing + other debt ≤ 36% of gross income
34
What is the Student Aid Index (SAI)?
Calculation used to determine financial need for federal financial aid.
35
What are the main types of financial aid?
Pell Grant (need-based), Stafford Loans (subsidized: need-based; unsubsidized: not need-based), PLUS Loans (not need-based, credit-based)
36
What are the annual contribution limits for 529 plans and Coverdell ESAs?
529: up to $95,000 per individual over 5 years (2025); Coverdell: $2,000 per beneficiary per year
37
What is the American Opportunity Tax Credit (AOTC)?
Up to $2,500 per student (first 4 years of postsecondary education), 100% of first $2,000 + 25% of next $2,000 in expenses
38
What is the Lifetime Learning Credit (LLC)?
20% of up to $10,000 in qualified expenses, max $2,000 per family, unlimited years
39
Who can claim the AOTC or LLC?
The person who pays the qualified expenses and claims the student as a dependent
40
What are the four tools of Federal Reserve monetary policy?
Reserve requirement, discount rate, open market operations, excess reserve rate
41
What happens when the Fed buys government securities?
Increases money supply, decreases interest rates.
42
What is the primary driver for renting vs. buying a home?
Expected time in the property (short = rent, long = buy).
43
What are the 15 Duties Owed to Clients by a CFP® professional?
Fiduciary Duty (Loyalty, Care, Follow Instructions) Integrity Competence Diligence Disclose and Manage Conflicts of Interest Sound and Objective Professional Judgment Professionalism Comply with the Law Confidentiality and Privacy Provide Information to a Client Duties When Communicating with a Client Duties When Representing Compensation Method Duties When Selecting, Using, and Recommending Technology Refrain from Borrowing or Lending Money and Commingling Financial Assets Duties When Recommending, Engaging, and Working with Additional Persons.
44
What is the difference between open and closed questions?
Open: encourages lengthy response; Closed: seeks short, pointed response
45
What are the three main learning styles and how should planners address each?
Visual (use charts/graphs), Auditory (verbal explanations), Kinesthetic (interactive presentations)
46
What are the two types of plan reviews?
Regular (predetermined intervals) and episodic (after major life events)
47
How often should investment results be communicated?
At least quarterly, or monthly during volatile periods; performance benchmarks at least annually
48
What is the planner’s role in crisis events?
Show empathy, reliability, and competency; focus on insurance, investments, emergency funds, and estate planning
49
What is the planner’s role in crisis events?
Show empathy, reliability, and competency; focus on insurance, investments, emergency funds, and estate planning
50
What are key government/state programs for special needs?
Federal: Special Education, Social Security, Veterans’ Benefits; State: residential, transportation, respite, family support, day programs, employment services
51
What is workers’ compensation?
Absolute liability for workplace injury; benefits not taxable
52
What is unemployment compensation?
Benefits for job loss, funded by employer tax, included in gross income
53
When is an ARM appropriate?
When property ownership will be short-term (1–3 years)
54
What is a reverse mortgage?
Provides income for homeowners 62+, repaid at death or sale
55
What documents are best for evaluating a refinance?
Loan Estimate (LE) and original loan documents.
56
Which assets are protected in Chapter 7 Bankruptcies?
Rollover IRAs (unlimited), IRAs/Roth (up to ~$1.3M), pensions, life insurance, annuities; inherited IRAs not protected
57
How do the following affect net worth?
Buying furniture on credit: liabilities ↑, net worth unchanged Stock appreciation: assets ↑, net worth ↑ Spending cash on vacation: assets ↓, net worth ↓ Buying car with loan: assets ↑, liabilities ↑, net worth unchanged.
58
What is the savings ratio?
(Annual Savings incl. employer/employee contributions) / Annual Gross Income; target 10–12%
59
What is ROI and its target?
Rate of Return on Investments; target 9–12% depending on age/risk.
60
What are the main features of 529, Coverdell ESA, Roth IRA, EE Bonds, UGMA/UTMA?
529: high limits, tax-free if used for education, $10k/year for K-12, $35k lifetime Roth rollover, parental asset Coverdell: $2k/year, K-12 and college, must use by age 30, AGI phaseout Roth IRA: 10% penalty waived for education, but may impact retirement EE Bonds: tax-free interest for education, must be parent-owned UGMA/UTMA: child’s asset for aid, can use for anything, subject to kiddie tax.
61
What are the AOTC and LLC credits?
AOTC: up to $2,500/student (first 4 years), 100% of first $2,000 + 25% of next $2,000; LLC: 20% of up to $10,000, max $2,000/family, unlimited years
62
What is the employer education assistance exclusion?
Up to $5,250/year for tuition/loan repayment excluded from income (through 2025)
63
What are key CFP Board deadlines?
Respond to Notice of Investigation: 14 days Address/email change: 30 days Evidence of mark use cessation: 45 days

CFP Exam Prep (39 decks)

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