1.1 FP Basics Flashcards

1
Q

Benefits of financial planning

A

1) Goals identified are more likely to be achieved; 2) helps clearly identify risk exposure; 3) creates framework for feedback, evaluation and control; 4) establishes measurable goals and expectations; 5) develops an improved awareness of financial choices; 6) provides opportunity for increased commitment to financial goals.

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2
Q

Subjectivity vs Objectivity

A

Subjectivity is perception of reality; objectivity is facts without distortion by personal feelings / prejudices.

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3
Q

Financial Planning

A

Process of determining whether and how clients can meet their goals through proper management of financial resources.

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4
Q

8 Major Domains

A

1) Establishing and defining client-planner relationship; 2) Gathering info necessary to fulfill engagement; 3) Analyzing and evaluating current financial status; 4) Developing recommendations; 5) Communicating recommendations; 6) implementing; 7) Monitoring; 8) Practicing within professional and regulatory standards.

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5
Q

Establishing / Defining Relationship (D1) (100 Series)

A

1) ID Client; 2) Discuss client’s FP needs and expectations; 3) Discuss FP process; 4) Explain scope of services offered; 5) Assess & communicate ability to meet needs and expectation of client; 6) ID & resolve potential conflicts of interest; 7) Discuss client and FP responsibilities; 8) Define and document scope of engagement; 9) Provide client disclosures; 10) Compensation arrangement and associated potential conflicts of interest

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6
Q

Gathering Data (D2) (200 Series)

A

1) ID client values & attitudes (a. explore psnl & finl needs, priorities, goals; b. time horizon for each; c. knowledge & exp w/fin’l matters; d. risk exposure; e. risk tolerance) 2) Gather data (a. assets - benes, basis, titling; b. liab - bal, term, int; c. inc/exp; d. est plng docs; e. educ plan & resources; f. retmt plan info; g. empl benefits; h. gov’t benefits; i. special circ - legal docs, fam sit; j. tax docs; k. invsmt stmts; l. ins policies; m. bsns docs - agreements; n. inheritances or windfalls; 3) Recognize need for add’l info

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7
Q

Analyzing & Evaluating Financial Status (D3) (300 Series)

A

1) Financial Status (bal sht, CF stmt, budget, cap needs - ins, retmt, major pchs); 2) Risk Mgmt (ins, retained risk, asset prot - titling, trusts, bsns form; client liquidity - emgcy fund; 3) Benefits eval (gov’t, employee); 4) Invsmt Eval (asset alloc, invsmt strat & types); 5) Tax Eval (current, deferred, future tax liab, inc types); 6) Retmt Eval (retmt plans & strat - pension options, annuitization; accumulation planning, distribution planning); 7) Est Plng Eval (est docs, tax liab, ownership of assets, bene desig, gifting strat); 8) Bsns Ownership (Form, employer benefits, succession planning, exit strategy, risk mgmt); 9) Educ Plng Eval (sources of fin, tax considerations); 10) Other Considerations (special circ - divorce, disab, family dynamics; inheritances, windfalls, large lump sums; charitable plng; eldercare.
ID and use approp tools and techniques to conduct analyses.

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8
Q

Developing Recommendations (D4) (400 Series)

A

1) Synthesize findings; 2) Consider alternatives to meet goals & obj (scenario analysis - lifestyle or sensitivity analysis - rates, time); 3) Consult w/other prof on tech issues outside of expertise; 4) Develop recs; 5) Document recs

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9
Q

Financial Planning

A

Process of determining whether and how clients can meet their goals through proper management of financial resources.

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10
Q

Communicating Recommendations (D5) (part of 400 Series)

A

1) Present Fin Pln to client and provide educ (goal review, assump, observations and findings, alternatives, recomm); 2) Obtain feedback and revise recomm; 3) Provide documentation of plan and recomm and applicable disclosures; 4) Verify client acceptance of recomm

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11
Q

8 Major Domains

A

1) Establishing and defining client-planner relationship; 2) Gathering info necessary to fulfill engagement; 3) Analyzing and evaluating current financial status; 4) Developing recommendations; 5) Communicating recommendations; 6) implementing; 7) Monitoring; 8) Practicing within professional and regulatory standards.

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12
Q

Monitoring Recommendations (D7) (600 Series)

A

1) Discuss and eval changes in personal circ; 2) Review pfmc and progress of plan; 3) Review and eval changes in legal, tax, econ envir; 4) Make recomm to accom changes and circ; 5) Review scope of work and redefine engagement; 6) Provide client ongoing support (counsel, educ)

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13
Q

Practicing within Prof Regulatory Standards (D8)

A

1) Adhere to CFP Board’s Code of Ethics nad Prof Resp and Rules of Cond; 2) Understand CFP Board’s Disciplinary Rules and Procedures; 3) Work within CFP Board’s FP Practice Standards; 4) Manage Practice Risk (documentation, monitor client noncompliance w/recomm); 5) Maintain Awareness of and Comply with Regulatory and Legal Guidelines

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14
Q

Gathering Data (D2)

A

1) ID client values & attitudes (a. explore psnl & finl needs, priorities, goals; b. time horizon for each; c. knowledge & exp w/fin’l matters; d. risk exposure; e. risk tolerance) 2) Gather data (a. assets - benes, basis, titling; b. liab - bal, term, int; c. inc/exp; d. est plng docs; e. educ plan & resources; f. retmt plan info; g. empl benefits; h. gov’t benefits; i. special circ - legal docs, fam sit; j. tax docs; k. invsmt stmts; l. ins policies; m. bsns docs - agreements; n. inheritances or windfalls; 3) Recognize need for add’l info

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15
Q

Implementing Recommendations (D6) (500 Series)

A

1) Create prioritized implem plan with timeline, 2) Assign responsibility, 3) Support client directly or indirectly; 4) Coordinate and share info, 5) Define monitoring resp - frequency and communication methods

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16
Q

Compensation

A

Trailing commissions, surrender charges, non-trivial economic benefit 12(b)1 fees

17
Q

Intellectual honesty and impartiality.

A

Objectivity

18
Q

Planner’s Responsibilities

A

IOCFCPD 1) Integrity: Take obligations seriously and place client interest over personal gain; 2) Objectivity: Use experience and judgment, consider situation; 3) Competency: Demonstrate appropriate level of knowledge; 4) Fairness: Treat client same way they’d like to be treated in professional relationship; 5) Confidentiality: Do not share info; 6) Professionalism: Avoid providing advice unless properly qualified and licensed; 7) Diligence: Discuss goals / objectives w/client and clarify expectations.

19
Q

Client’s Responsibilities

A

1) Take active role in shaping financial future; 2) Have realistic goals; 3) Treat planner professionally; 4) Share relevant personal and financial info; 5) Share info of other advisers.

20
Q

CFP Board Established

A

1985

21
Q

Prompt, thorough service, proper planning for, supervision of, rendering of professional service.

A

Diligence

22
Q

Behaving with dignity, courtesy, cooperation; improve quality of service.

A

Professionalism

23
Q

Ensuring that info is accessible only to those authorized.

A

Confidence

24
Q

Impartiality, intellectual honesty, disclosure of material conflicts of interest, subordination of one’s own feelings, prejudices and desires, to achieve proper balance. Treating others as though you’d like to be treated.

A

Fairness

25
Q

Attaining and maintaining adequate level of knowledge, skill, applying that to providing services. Includes wisdom to recognize limitations and when consulting w/other professionals is appropriate.

A

Competence

26
Q

Intellectual honesty and impartiality; protect integrity of work, avoid subordination of judgment.

A

Objectivity

27
Q

Honesty and candor; not subordinated to personal gain and advantage. Trusted by clients.

A

Integrity