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CFP > Financial Planning > Flashcards

Financial Planning Flashcards

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CFP® flashcards
1
Q

CFP board code of ethics

A 
Integrity
Objectivity
Competence
Fairness
Confidentiality 
Professionalism
Diligence 
I only choose fun chilled party drinks
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2
Q

CFP boards practice standards

A 
Establishing relationship
Gathering data and goals
Analyzing financial status
Present and recommend
Implementation
Monitoring
EGAPRIM
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3
Q

Total consumer debt as a % of net income

A

20%

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4
Q

Medicare parts

A

A: hospital, hospice, zero premium if 40 quarters of contribution
B: physician and out of hospital, ambulance, lab services
C: Medicare advantage a,b,d
D: prescription drugs out of pocket $4,700

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5
Q

Truth in lending 1968

A

$50 limit of lost/ stolen credit cards

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6
Q

Fair credit reporting act 1971

A

Credit agencies must have correct and accurate info

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7
Q

Life insurance 5th dividend option

A

Dividends treated as net single premium, purchasing one year term insurance at insured attained age

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8
Q

4 elements of insurable risk

A

1) must have a sufficient large number of homogeneous exposure to make losses reasonably predictable
2) loss must be definite and measurable
3) loss must be fortuitous or accidental
4) loss must NOT be catastrophic

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9
Q

Rules of risk management

A

Do not risk more than u can afford to loss
Consider the loss
Do not risk a lot for a little

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10
Q

3 pronged test for investment advisor

A

A, advice or analysis
B, business
C, compensation

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11
Q

Insurance broker

A

Represents the insured

Works with many insurers

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12
Q

Insurance agent

A

Represents the insurance company
Has implied or apparent authority to bind coverage
Passes legal liability to the insurer

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13
Q

Life ins settlement options

A

1) interest option- proceeds left with with insurer
2) fixed period option
3) fixed amount option
4) life income options
Straight life
Period certain
Income refund
Joint and last survivor

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14
Q

Life ins non forfeiture options

A

1) cash surrender
2) reduced paid up premium
3) extended term, keep existing DB for a specified time period

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15
Q

CFP rules of conduct

A 
D, defining the relationship
I, information disclosed
C, client information and property
O, obligations to client
O, obligation to employer
O, obligation to CFP board
Report to CFP board within 10 days
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16
Q

RBC ratio

A

Risk based capital as it pertains to insurance companies

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17
Q

Vatican agreements and life settlements

A

Death benefit is taxable to the purchaser as an investment
( above cost basis)

Insured is diagnosed terminally ill, die in 2 years

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18
Q

Homeowners insurance ho5

A

Cadillac of insurance open peril a,b,c

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19
Q

Homeowners insurance ho8

A

Antique home, basic a,b,c

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20
Q

Homeowners insurance ho6

A

Renters insurance, ( renter has 6 letters)

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21
Q

Section 1 under homeowners insurance

A 
Covers property losses
A= insures dwelling (some landscape)
B= other structures ( detached garage)
C= general personal property ( renters excluded)
D= loss of use coverage ( expenses)
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22
Q

Linton yield

A

Compares cash value life insurance vs buying term insurance and investing the difference

23
Q

Buy/sell agreement life insurance
Stock redemption
Or
Cross purchase

A

Stock redemption= business agrees to buy the deceased shareholders stock

Cross purchase = each business owner agrees to buy out the interest of the deceased business owner

24
Q

Investment advisor EXCEPTIONS, does not have to register with the SEC…not considered advisors

A

Bank
Lawyer, accountant, teacher
Broker, dealer ( incidental without compensation)
Publisher
Person who advise is limited to government issues securities
Other persons not within the intent of SEC law

25
Q

Exemption to register as investment advisor

A

1) clients are all residents in the state which is the advisors principle residence and advise is only on non-listed securities
2) clients are only insurance companies
3) fewer then 15 clients during the last 12 months
4) charitable organizations
5) provides advice to church group plan
6) commodity futures trader, not providing advice

26
Q

Disability insurance continuation provisions

A

Non-cancelable (non can): no can increase premium for stated number of years

Guaranteed renewable: similar to non-can, but insurer can raise premium for an entire class

27
Q

Life insurance method that requires the greatest amount of insurance

A

Interest only method, because it will replace lost income without depleting principle

28
Q 
1933
1934
1940
1970
1988
A

1933: new issue requires prospectus
1934: secondary market
1940: requires registration with SEC, mutual funds, UIT
1970: SIPC protects investors from losses due to brokerage house failure
1988: insider trading

29
Q

Legal characteristics of insurance contracts

A

Aleatory, unequal dollars
Adhesion, you wrote it, your stuck with it
Conditional, pay premium
Personal, between insurer and insured
Unilateral, only one side is under legal obligation

30
Q

Types of permanent life insurance

A

Whole life, insurer invests & bundled
Variable life, insured invested & bundled

Universal life, insurer invests & Unbundled
Variable Universal, insured invests & Unbundled

31
Q

Basic home owner perils

A 
Fire & lightening
Wind and hail
Explosion
Riot
Vehicle
Aircraft
Smoke
Vandalism
Theft
Volcanic eruption
NOT earth movement or FLOOD
32
Q

Cobra coverage terms

A

18 months for termination

29 months disability

36 months for spouse if employee is eligible for Medicare or dies

33
Q

Presumptive disability

A

Loss of 2 limbs is viewed as totally disabled

As is loss of sight, hearing or speach

34
Q

Per stirpes

Per capita

A

Per stirpes, by branch, only on share of the deceased

Per capita, by head, share equally

35
Q

Part time student financial aid

A

Pell grant or supplementary grant

DO NOT get loans

36
Q

Life insurance dividends

A

1) dividends paid out in cash
2) reduce premiums
3) accumulate at interest
4) paid up dividend additions
5) one year term insurance

37
Q

Monthly housing payment,
PITI, principle, interest, taxes, insurance
No more than_______% gross income

A

28%

38
Q

Total monthly debt payments no more than

_________% of gross income

A

36%

39
Q

Grants for graduate students

A

Grad students ONLY get grants for teaching

Grad students DO NOT get grants

40
Q

HIPPA rules

A

Pre-existing condition : can not apply coverage exclusion for more than 12 months

Pregnancy NOT a pre-existing condition

If between job plans more than 63 days, NO pre-existing allowed

41
Q

Surrogation

A

Repayment of insurance claim by the party at fault to the insurance co NOT at fault

42
Q

Non participating life insurance company dividends

A

Dividends are paid to shareholders, taxable

43
Q

Participating life insurance companies

A

Mutual insurance
Dividends are paid the policy holders as return of premium,
NOT taxable

44
Q

HSA limits

A

HDHP min. Deductible $1,200/$2,400, single / family
HDHP max out of pocket $6,050/$12,100, single/family
Max annual contribution, $3,100/$6,250 + $1,000 over age 55
20% penalty for non eligible expenses

45
Q

Medicare part D parts

A

1) $320 deductible
2) $652.50 co-pay
3) $3727.50 , 100% paid out of pocket
= $4,700, total paid out of pocket

46
Q

Unemployment benefits last ? Weeks

A

Unemployment benefits can last 26 weeks
- also require minimum income and
A period of covered employment is required

47
Q

Employers with less than ? Employees are NOT subject to COBRA rules

A

Less than 20 employees

48
Q

Employer Penalty for not offering continuation (cobra) coverage

A

$110/day, per beneficiary fine

49
Q

Employee funded secular trust

A 
Funded
Deferred comp plan
Employer gets tax deduction 
Employee is taxed
Employe gets partial tax free income from trust in retirement
50
Q

Constructive receipt of non qualified deferred comp

A

Constructive receipt results in taxation of benefits , this is generally only relevant for funded plans

51
Q

Individuals who are eligible for Medicare Part A area automatically enrolled in

A

Medicare Part B

52
Q

Penalty for a disqualified person (fiduciary) engaging in prohibited transaction

A

15% penalty is imposed annually until transaction is corrected

53
Q

Standard, required percent coverage for home owners on dwelling

A

80% coverage on dwelling

CFP (5 decks)

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