CFP Book Volume I Flashcards
Six Principles of CFP Code of Ethics
- Act with honesty, integrity, competence, and diligence.
- Act in the client’s best interests.
- Exercise due care.
- Avoid or disclose and manage conflicts of interest.
- Maintain the confidentiality and protect the privacy of client information.
- Act in a manner that reflects positively on the financial planning profession and CFP® certification.
CFP Board Standards of Conduct
A. Duties Owed to Clients
B. Financial Planning and Application of the Practice Standards for the Financial Planning Process
C. Practice Standards for the Financial Planning Process
D. Duties Owed to Firms and Subordinates
E. Duties Owed to CFP® Board
F. Prohibition on Circumvention
Integrity
A CFP® professional must perform Professional Services with integrity. Integrity demands honesty and candor, which may not be subordinated to personal gain or advantage. Allowance may be made for innocent error and legitimate differences of opinion, but integrity cannot co-exist with deceit or subordination of principle.
What are the three fiduciary duties owed by the CFP professional?
Duty of Loyalty
Duty of Care
Duty to Follow Client Instruction
Financial Advice
A reference to “Financial Advice” is to Financial Advice that DOES NOT require Financial Planning and a reference to “Financial Planning” is to Financial Advice that DOES require Financial Planning
A. Communication that, based on its content, context and presentation, would reasonably be viewed as recommendation that the Client take or refrain from taking a particular course of action with respect to:
The Development or implementation of a financial plan
The value or or the advisability of investing in, purchasing, holding, gifting, or selling Financial Assets
Investment policies or strategies, portfolio composition, the management of Financial Assets or other financial matters
The selection and retention of other persons to provide financial or Professional Services to the Client
B. The exercise of discretionary authority over the Financial Assets of a Client
Financial Planning
A reference to “Financial Advice” is to Financial Advice that DOES NOT require Financial Planning and a reference to “Financial Planning” is to Financial Advice that DOES require Financial Planning
A collaborative process that helps maximize a Client’s potential for meeting life goals through Financial Advice that integrates relevant elements of the Client’s personal and financial circumstances
List the Seven Step Financial Planning Process
Understanding the Client’s Personal & Financial Circumstances
Identifying and Selecting Goals
Analyzing the Client’s Current Course of Action and Potential Alternative Course(s) of Action
Developing the Financial Planning Recommendation(s)
Presenting the Financial Planning Recommendation(s)
Implementing the Financial Planning Recommendation(s)
Monitoring Progress and Updating
What are the two phases of the business cycle?
Expansion
Contraction
Expansion
Characterized by increasing Gross Domestic Product & decreasing unemployment rate
Contraction
Characterized by decreasing GDP & increasing unemployment
What are the two phases in the business cycle?
Peak
Trough
Peak
Characterized by very high GDP & peak employment (very low unemployment)
Trough
Characterized by very low GDP (very typically negative GDP) & high and widespread unemployment
Define GDP
The market value of the goods and services produced by labour and property within the borders of a country
Define Recession
Two consecutive quarters of negative GDP growth.
Not every contraction is a recession, however every recession is a contraction
Real GDP Includes:
Market Value of all final goods and services produced within an economy
Income earned by foreigners working in the United States
Profits that foreign companies earn in the United States
Real GDP Excludes:
Imports
Inflation
Transactions where money changes hands but no new goods or services are produced
Income of US citizens working abroad
Profits earned by US companies in foreign countries
GDP Formula
Y = C + I + G + (X - M)
C = Consumer spending
I = Investment made by industry
G = Government spending
X - M = Excess of exports over imports
What is the basic law that determines the price of a good or service
The quantity supplied of goods and services relative to the quantity demanded of those goods and services determines the price.
Substitutes
An increase in the price of one will cause an increase in the demand for another
If the price of oil, gas or propane sudden;y rose sharply, the demand for firewood would most likely increase
Compliments
Products that are usually consumed jointly. They are related such that a decrease in the price of one will cause an increase demand for the other
When peanut butter goes on sale, the demand for jelly will increase
