Fundamentals

Question 1

Federal Pell Grant

Answer 1

• Strictly NEED based and dependent on EFC amount
• EFC determines eligibility and amount awarded
• Only students who have not earned a bachelors degree qualify

Question 2

Stafford Loan

Answer 2

• Primary type of Financial Aid provided
• Repayment begins after a 6 month grace period of leaving school or falling below part time status
• Not appropriate if parents intend to repay the loans
• Subsidized or Un-subsidized

Question 3

A CFP must timely disclose

Answer 3

material changes to compensation

Question 4

Subsidized loans are not available to:

Answer 4

graduate students

Question 5

The CFP Board does note mandate

Answer 5

business models nor delivering an investment policy statement

Question 6

There is no limit for the number of:

Answer 6

Coverdell ESA for a particular beneficiary, but total contributions to all accounts cannot exceed $2000

Question 7

IRA distributions when used for college:

Answer 7

are taxable, however, they are not subject to the 10% penalty

Question 8

Exceptions to registration w/ the SEC:

Answer 8

TABLES: teachers, accountants, brokers, lawyers, & engineers

Question 9

Exemptions from registration:

Answer 9

VIPs are SaFe from exemptions
Venture Capital, Insurance companies, Private funds < $150M, home State, Foreign advisors and securities not on a national exchange

Question 10

Consumer debt payments

Answer 10

no more than 20% of net income

Question 11

Parent Loans for Undergraduate Students (PLUS) loans

Answer 11

a loan for parents to pay for their children’s undergrad studies, NOT need based

Question 12

Grad Plus Loan

Answer 12

dependent on student’s credit score

Question 13

A CFP must disclose conflicts of interest:

Answer 13

at the initiation of client relationship, before providing services

Question 14

Names and numbers

Answer 14

Quantitative

Question 15

The CFP Board does not make immediate bankruptcy related decisions:

Answer 15

they will consider if the bankruptcy was a result of an inability to manage personal finances.

Question 16

Referring one client to another:

Answer 16

is rife w/ potential conflicts of interest

Question 17

The duty of competence requires the planner:

Answer 17

to either refer the client to an expert or bring an expert into the engagement. Preparing the plan w/ the help of an expert is acceptable under the code and standards.

Question 18

An investment advisor may be able to use their form:

Answer 18

ADV Part II to meet the CFP Board disclosure requirements

Question 19

The disclosure brochure must be given to the clients:

Answer 19

at or before the time an advisory engagement is entered into

Question 20

Debts not discharged by ch.7 bankruptcy:

Answer 20

student & gov loans
3 years of back taxes
alimony and child support

Question 21

Housing debt:

Answer 21

no more than 28% of gross income

Question 22

Housing debt + all other reoccurring debt:

Answer 22

no more than 36% of gross income

Question 23

Consumer debt payments:

Answer 23

no more than 20% of net income

Question 24

The obligation of integrity requires:

Answer 24

a CFP professional to be honest and upstanding.

Question 25

A material conflict is one that:

Answer 25

could impact advice given by the CFP Professional or cause potential harm

Question 26

Financial Advice:

Answer 26

A communication that, based on its content, context, and presentation, would reasonably be viewed as a recommendation that the client take or refrain from taking a particular course of action.

Question 27

CFP Board defines a felony as:

Answer 27

An offense punishable by one year or more in jail or over $1000 fine.

Question 28

Prohibition on circumvention:

Answer 28

A CFP Professional may not do indirectly, or through or by another person or entity, any act or thing that the Code and Standards prohibit the CFP Professional from doing directly.

Question 29

If a prospect refuses to supply tax returns or any documents that support income claims:

Answer 29

limit the scope of the engagement or disengage.

Question 30

Life Insurance:

Answer 30

10-16 x gross pay

Question 31

Retirement amount:

Answer 31

16 x pre-retirement income

Question 32

The “big three” legacy planning documents:

Answer 32

Will, Durable Power of Attorney for Healthcare, and Advanced Medical Directive

Question 33

Money avoidance:

Answer 33

tries not to think about money; believes they do not deserve money.

Question 34

Money worship:

Answer 34

buys things in an effort to create happiness

Question 35

Money status:

Answer 35

needs to keep up the appearance of being successful

Question 36

Money vigilance:

Answer 36

alert and watchful in financial matters; may have anxiety about financial future

Question 37

Affect heuristic:

Answer 37

judging something as good or bad

Question 38

Availability heuristic:

Answer 38

relying on knowledge already attained

Question 39

Anchoring:

Answer 39

focusing on a particular reference point even if it is not relevant or pertinent to the issue in question

Question 40

Herding:

Answer 40

mimicking the actions of a larger group

Question 41

Duty of loyalty:

Answer 41

client’s interest ahead of planner’s; avoid or disclose, maintain client’s informed consent, and manage conflicts of interest

Question 42

Duty of care:

Answer 42

skill, prudence, & diligence

Question 43

Duty to follow client instructions:

Answer 43

if reasonable and lawful