02 - General Principles of Financial Planning Flashcards
What are the six steps to the financial planning process?
E - Establishing and defining the client-planner relationship
G - Gathering client data including goals
A - Analyzing and evaluating the client’s current financial status
D - Developing and presenting recommendations and/or alternatives
I - Implementing the recommendations
M - Monitoring the recommendations
(Every Good Apple Does Invest Money)
What is the Financial Planning Practice Standard 100-1
100-1: Defining the Scope of the Engagement.
What is intention of the practice standard 100-1: Defining the Scope of the Engagement
The financial planning practitioner and the client shall mutually define the scope of the engagement before any financial planning service is provided
What is the Financial Planning Practice Standard 200-1
200-1: Determining a Client’s Personal and Financial Goals, Needs and Priorities
What is the intention of the practice standard 200-1: Determining a Client’s Personal and Financial Goals, Needs and Priorities
Mutually define client’s personal and financial goals, needs and priorities that are relevant to the scope of the engagement before any recommendation is made
What is the Financial Planning Practice Standard 200-2
200-2: Obtaining Quantitative Information and Documents
What is the intention of the practice standard 200-2
Obtain sufficient quantitative information and documents about a client relevant to the scope of the engagement before any recommendation is made and/or implemented
What is the Financial Planning Practice Standard 300-1
300-1: Analyzing and Evaluating the Client’s Information
What is the intention of the practice standard 300-1
i. Must analyze the information to gain an understanding of the client’s financial situation and then evaluate to what extent the client’s goals, needs, and priorities can be met by the client’s resources and current course of action. You must consider both personal and economic assumptions in this step such as retirement age, life expectancy, income needs, inflation rates, and investment returns
What is the Financial Planning Practice Standard 400-1
400-1: Identifying and Evaluating Financial Planning Alternative(s)
What is the intention of the practice standard 400-1
Consider sufficient and relevant alternatives to the client’s current course of action in an effort to reasonably meet the client’s goals, needs and priorities.
What is the Financial Planning Practice Standard 400-2
400-2: Developing the Financial Planning Recommendation(s)
What is the intention of the practice standard 400-2
Develop the recommendations based on the selected alternatives and the current course of action in an effort to reasonably meet the client’s goals, needs, and priorities.
What is the Financial Planning Practice Standard 400-3
400-3: Presenting the Financial Planning Recommendation(s)
What is the intention of the practice standard 400-3
Communicate recommendations in a way that will assist the client in making an informed decision.
What is the Financial Planning Practice Standard 500-1
500-1: Agreeing on Implementation Responsibilities
What is the intention of the practice standard 500-1
The financial planning practitioner and the client shall mutually agree on the implementation responsibilities consistent with the scope of the engagement.
What is the Financial Planning Practice Standard 500-2
500-2: Selecting Products and Services for Implementation
What is the intention of the practice standard 500-2
i. The financial planning practitioner shall select appropriate products and services that are consistent with the client’s goals, needs, and priorities.
ii. All products selected must be suitable to client’s situation.
iii. The products one CFP professional selects may differ from what other CFP professionals would select.
iv. CFP Board assumes more than one product can reasonably meet goals.
What is the Financial Planning Practice Standard 600-1
600-1: Defining Monitoring Responsibilities
What is the intention of the practice standard 600-1
The CFP professional and client shall mutually define monitoring responsibilities.
In general, how many subject areas are engaged to define a financial planning engagement? Are there any other indications that a financial planning engagement is in place?
It is generally believed that two or more subject areas are warranted to define financial planning, but you must look at the facts. In particular:
a. “U” and “I” “M”ust “C”oordinate “B”etter
i. Understanding and Intent in engaging CFP
ii. Multiple financial planning areas covered
iii. Comprehensiveness of data gathered
iv. Breadth and depth of recommendations
In the financial planning practice, are assets, liabilities, and net worth shown at their current market value, or historical value?
Assets, Liabilities, and net worth are shown at their current market value
On the balance sheet prepared by a financial planner, how many primary categories are shown in the asset section? What are the primary categories?
There are three primary categories in the asset section of the balance sheet
i. Liquid assets (or current assets or monetary assets)
ii. Investment assets
iii. Personal use assets (or household assets or other assets)