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CFP Final > CFP Final > Flashcards

CFP Final Flashcards

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CFP® flashcards
1
Q

Fee Only Advisor:

A

May NOT receive sales related comp

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2
Q

Borrowing money as a CFP

A

Permitted from a family member or client that regularly engages in the business of lending

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3
Q

Fee-Based:

A

Planner or firm are compensated through BOTH commission and fees

Sales Comp:
Commission, 12 b-1, Bid/Ask spread, TRX fees, Revenue sharing, solicitor fees.

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4
Q

Who is tasked with disciplinary actions?

A

DEC - Max sentence 5 years.

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5
Q

The Fitness Standards provides the standards against which CFP Board will evaluate the

A

ethical fitness of a candidate for CFP® certification

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6
Q

PITI

A

Principal, Interest, Taxes (property), and Insurance (homeowners)

28% of GROSS INCOME (not net)

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7
Q

Debt does not include:

A

Taxes or insurance

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8
Q

IF NPV is Positive =

If NPV is Negative =

A

Positive = IRR > RRR

Negative = IRR < RRR

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9
Q

What agencies monitor banks:

A

FDIC
Fed Reserve
Comptroller of currency

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10
Q

Insurance industry three branches of gov’t:

A

Legislative passes laws
Courts interprets laws
Executive branch enforces the laws

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11
Q

Who regulates brokerage companies?

A

Both the SEC and FINRA are involved in regulating brokerage companies, but FINRA is the organization specifically tasked with the direct regulation and oversight of brokerage firms on a day-to-day basis. The SEC regulates THROUGH FINRA

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12
Q

American Opportunity Credit (AOC):

A

$2,000 + 25% of expense up to $2,500

Only first 4 years of college

MAGI phase outs

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13
Q

Lifetime Learning Credit:

A

$2,000 max (20% first $10k)

Under grad, grad, continuing ed

MAGI phase outs

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14
Q

Coverdell Withdrawal:

A

College, must be used by 30

Max contribution in total of $2,000

MAGI phase out

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15
Q

529 and Coverdell accounts are considered:

A

Treated as parents assets for financial aid

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16
Q

For a business to qualify for COBRA:

A

Must have 20 employees

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17
Q

Compensatory vs Punitive:

A

Compensatory tax free
Punitive is taxable

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18
Q

What does the federal reserve influence?

A

Monetary Policy

  1. Reserve Requirements
  2. Discount Rate (Fed reserve charges banks to borrow)
  3. Open Market Operations
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19
Q

Leading Indicators:

A

Initial claims for unemployment Insurance
New manufacturing orders
New private housing
Stock prices
Index of consumer expectations

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20
Q

Coincidental Indicator:

A

Industrial Production

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21
Q

What leads CPI or PPI?

A

PPI leads CPI

As producer costs rise, tend to pass to the consumer (CPI)

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22
Q

What is the slowing down of prices called?

A

Disinflation

(Deflation is the decline in the price)

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23
Q

FHA:

A

Federal Housing Admin

Gov’t guaranteed loans.

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24
Q

Definition Investment Advisor:

A

All three “ABC”

Advice, Business, Compensation

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25
Q

FINRA Registration:

A
  1. Associate with broker dealer
  2. Register with FINRA through a B/D on form U4
  3. Pass exams
  4. Central Registration Depositary (CRD)
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26
Q

Perils (Basic):

A

WHARVES / FLT

Wind / Aircraft / Riot / Vandalism / Vehicles / Explosion / Smoke / Fire / Lightning / Theft

27
Q

Perils (Broad):

A

WHARVES / FLT + RAFF

RAFF
Rupture in system / Artificial Electricity Generated / Falling objects / Freezing

28
Q

Homeowner Exclusions:

A

OPEN WIF

Ordinance / Power Failure / Earthquake / Nuclear / War / Intentional loss / Flood

29
Q

Coinsurance required for residential and commercial buildings:

A

80% and 90%

30
Q

Replacement cost vs ACV:

A

When items replaced on a replacement cost - no deduction for depreciation

Under ACV, losses are replacement cost - depreciation

31
Q

Disability Insurance

Premiums paid by: EE
Contract owned by: EE

A

Benefits Tax free
Not deductible for premiums

32
Q

Disability Insurance

Bonus arrangement Section 162
Premiums paid by: ER
Contract owned by: EE

A
  • Benefits : Tax free (premium included on W2)
  • Deductible by ER as a bonus
33
Q

Disability Insurance

Paid by ER under salary continuation (Group Plan)
Premiums paid by: ER
Contract owned by: EE

A
  • Benefits are taxable
  • Deductible by ER
34
Q

Disability Insurance

Paid by partnership or S Corp
Premiums paid by: Partnership/S Corp
Contract owned by: Partnership/S Corp

A
  • Benefits are tax free
  • Deductible by Partnership/S Corp
35
Q

Skilled nursing Medicare coverage:

A
  • First 20 days paid in full by Medicare
  • 21 - 100 co pay ($204 per day)
  • > 100 days insured pays in full

Skilled nursing means condition SHOULD get better - no Alzheimer’s

36
Q

5th Dividend option:

A

Purchasing 1 year term with dividends

37
Q

Nonforfeiture Options for insurance:

A
  • Cash out (6 month delay can be imposed**)
  • Reduced paid up
  • Paid up term
38
Q

Life Insurance Dividend options:

A
  • Cash
  • Reduced premium due
  • Accumulate with interest
  • Paid up additions
  • One-year term (the divided)
39
Q

Split Dollar Plans:

A

Endorsement method or Collateral assignment method

40
Q

Collateral Assignment Method:

A

EE is the owner
Death of EE ER gets premiums back
EE gets CV or beni gets DB

41
Q

Endorsement method:

A

ER owns the policy and retains CV and EE beni gets the balance of DB

42
Q

BOE

A

Business overhead expense

When business owner is disabled actual expenses are paid (not salary)

43
Q

BOE for sole propritors:

A

Premiums paid on BOE during disability ARE DEDUCTIBLE and proceeds are TAXABLEBOE for

44
Q

BOE for Corporations:

A

Premiums are not deductible, but benefits are tax free

45
Q

Joint life vs joint life and survivor annuity:

A

Joint and survivor continues

Joint life ceases on death of first annuitant

46
Q

When purchasing a split dollar policy, endorsement method:

A

You pay the higher of the CV or premiums paid

47
Q

Must register with state vs SEC:

A

Must register with state, Advisers managing between $100 million and $110 million in AUM have the option to register with the SEC or the state but must register with the SEC once they exceed $110 million in AUM.

48
Q

OID Bonds interest income:

A

Pay no interest until maturity. However, each year a portion of taxable interest income is included - no interest income but must report taxable - phantom income

49
Q

Tbill / Notes / Bonds maturities:

A

Bills: 3, 6, and 12
Notes: 1-10 years
Bonds: 10-30 years

50
Q

STRIPS discount is treated:

A

Taxable income earned annually

51
Q

TIPS:

A

Taxed annually on interest plus appreciation of face value

52
Q

EE Bond and I Bonds taxation:

A

Interest earned is not subject to fed taxation until redeemed, Could instead have interest taxed each year

53
Q

Indenture:

A

Formal agreement, deed of tryst between bond issuer and the trustee:

  • Form of bond
  • amount of issue
  • property pledged
  • Protective covenant
  • Working capital/CR
  • Redemption rights
54
Q

NOI Calc:

A

Gross Rental Receipts
+ Non rental income
——————————–
= Potential Gross Income (PGI)
- Vacancy/collection losses
= Effective Gross income
- OE
————————————–
= NOI

55
Q

Intrinsic Value:

A

IV = NOI / Cap Rate

56
Q

If correlation is +1:

A

the weighted avg risk is the MAX

57
Q

To avoid penalties when estimating tax:

A
  1. 90% of current years tax liability
  2. 100% of prior years liability
  3. 110% of last years liability if GI is >$150k
58
Q

Failure to file income tax return:

A

5% of taxes due each month up to 25%

59
Q

Failure to pay taxes:

A

.5% per month up to 25%

60
Q

Fraud when doing taxes:

A

75% of under paid amount

61
Q

Negligence when doing taxes:

A

20% under payment amount

62
Q

Frivolous return:

A

$5,000 - omitting info needed to determine tax liability

63
Q

MACRS Property Classes:

A
  • 5 Year (1245) “CAT” - Computers, Autos, trucks
  • 7 Year (1245): Office furniture
  • 27.5 Year (1250): Residential Rental Property
  • 39 Year (1250): nonresidential real property

CFP Final (4 decks)

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