Foundamental

Question 1

When does CFP Board’s Code of Ethics and Standards of Conduct say that a CFP professional must act as a fiduciary?

Answer 1

When provides financial advice

Question 2

CFP standards of Conduct

Answer 2

• Integrity: Right thing
• Competence: know things, limitations
• Diligence: return phone calls timely
• Disclosure conflicts of interest

Question 3

Fiduciary Duty

Answer 3

Fiduciary Duty= Duty of Loyalty + Duty of Care + Duty to follow client instruction

Duty of loyalty: act in the client’s best interests
Duty of care: care, prudence, diligence

Question 4

Financial planning Process

Answer 4

Uber Is A Drunk Person’s Immediate Motor
1. Understanding the Client’s Personal and Financial Circumstances. (gather data and analyze)
2. Identifying and Selecting Goals( goals should be achievable and measurable)
3. Analyze the client’s current course of action and potential alternative courses of action
4. Developing the Financial Plan Recommendations
5. Presenting the Financial Planning Recommendations
6. Implementing Financial Plan Recommendations
7. Monitoring the Plan

Question 5

Life changes need to notify CFP?

Answer 5

Yes. Notify CFP asap.

Question 6

How CFP boards address responsibilities

Answer 6

• CFP’s responsibilities to ER
• CFP’s responsibilities to the board
• CFP’s responsibilities to clients

Question 7

How will bankruptcies affect CFP?

Answer 7

Bankruptcies disclosed on CFP’s public website for 10 yrs; names included once in a press release issued periodically by the board.

Question 8

Sell variable annuities, need what license?

Answer 8

Series 6 and state insurance license

Question 9

Series 6

Answer 9

Mutual funds, UITs, variables

Question 10

Monetary policy

Answer 10

Reserve requirements
Open Market Operations
Discount rate
Excess Reserve Rate

Question 11

Fiscal policy

Answer 11

Spending
Taxation
Debt Management

Question 12

Federal reserve 3 main goals

Answer 12

Maintain long term economic growth;
Maintain price levels supported by the economy;
Maintain full employment

Question 13

Bankruptcy laws fully protected

Answer 13

SEP, SIMPLE, SARSEP

Question 14

Distributions from plans owned by someone, other than the parents, for educational expenses are considered income of the child for FASFA purposes. True or false

Answer 14

True

Question 15

Programs to Reduce Student Loan Payments

Answer 15

• Pay As You Earn Repayment: Monthly student loan repayment of 10% of discretionary income with remaining debt forgiveness after 20 years.
• Income Based Repayment (IBR): Monthly student loan repayment of 15% of discretionary income with remaining debt forgiveness after 25 years.
• Income Contingent Repayment (ICR): Monthly student loan repayment of 20% of discretionary income with remaining debt forgiveness after 25 years.

Question 16

529 Tax free withdraw Items

Answer 16

TFBSE R+B; Tuition, Fees, Books, Supplies, Equipment, Room and Board

Question 17

I-bonds

Answer 17

Favorable tax treatment for education

Question 18

AOTC

Answer 18

Per taxpayer; All 4 years, degree program; Undergraduate Only;
Not for felony or durg;
phaseout;
TFBSE; No room and board;
Credit (100% of first $2000, 25% of second $2000, max $2500)

Question 19

Lifetime Learning Credit

Answer 19

Per return;
Could be used for graduate; phaseout;
No room and board;
Could apply if felony drug

Question 20

Which education plan does not have phaseout?

Answer 20

Only 529 and prepaid tuition plan does not have phaseout, everything else have a phaseout.

Question 21

Applying for need based financial aid, what are NOT considered when calculating financial aid?

Answer 21

Personal items
Retirement Assets

Question 22

What is the disadvantage of blue chip common stock?

Answer 22

No diversification