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CFP > Fundamentals > Flashcards

Fundamentals Flashcards

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CFP® flashcards
1
Q

Exceptions to Registration with the SEC (7)

A

brokers, Lawyers, teachers, engineers who’s advice is solely incidental to their profession
banks, publisher, advisors who only deal with securities guaranteed by the US gov

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2
Q

What securities can you sell with series 6 (4 answers)

A

Mutual funds, UITs, variable life insurance and variable annuities

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3
Q

What securities can you sell with series 7

A

Everything except commodities and futures

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4
Q

Exemptions to register with SEC

A

if advise is pertaining to venture capital funds, insurance companies, private funds less than 150m, advisor in home state, foreign advisors, and securities not on a national exchange
(VIPunder150mFAS)

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5
Q

Financial Planning Process

A

Understanding clients personal & financial circumstances, Identifying and Selecting goals, analyzing current course of action and potential alternatives, developing recommendations, presenting recommendations, implement, monitor & update

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6
Q

life insurance bench mark

A

10-16 x gross pay

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7
Q

Disability Benchmark

A

60-70% of gross pay

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8
Q

Personal Liability Umbrella Policy (PLUP) Benchmark

A

1-3m

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9
Q

Housing Ratios

A

28% PITI/ Monthly gross income
36% PITI+ Recurring Debt / Monthly Gross Income

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10
Q

Emergency Fund Benchmark

A

3-6 months (current assets/ monthly non-discretionary cash flows)

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11
Q

Education Fund Benchmark

A

3k(public school)/6k (semi- private ) /9k (private school) per child per year for 18 yrs

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12
Q

Retirement Benchmark

A

16x pre retirement income
savings- 10-12% of income
return- 8-10% expected
Risk/ Standard Deviation- 8-14%

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13
Q

Long Term Care Benchmark

A

policy that provides daily benefit for nursing home care, home health care, with inflation protection

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14
Q

Legacy documents required

A

Will, durable power of attorney for health care, Advanced Medical Directive.

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15
Q

Price Elasticity

A

measures the change in quantity demanded, relative to changes in price

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16
Q

Elastic demand

A

responds significantly to changes in price

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17
Q

Inelastic Demand

A

quantity demanded changes very little to changes in price (necessities)

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18
Q

Recession

A

6 consecutive months (2 qrtrs) of negative GDP

19
Q

Depression

A

18 months or (6 qrtrs) of negative GDP

20
Q

Deflation

A

Prices are falling

21
Q

Disinflation

A

decline or slowdown in rate of inflation

22
Q

CPI

A

(consumer price index) measures price change in basket of goods & services in the retail sector

23
Q

PPI

A

(producer price index) measures price change in whole sale and manufacturing sectors

24
Q

Fed reserve main goals

A
  1. maintain long term economic growth
  2. maintain price levels
  3. maintain full employment
25
Q

Fed Reserve Tools

A
  1. reserve requirement
  2. Discount rate (overnight rate which member banks can borrow from the fed reserve to meet reserve requirements)
  3. Open market Operations
  4. Excess Reserves
26
Q

Fiscal policy- Congress 3 main goals

A
  1. Maintain economic growth
  2. Maintain price stability
  3. Maintain full employment
27
Q

FDIC Insurance- Four Types of ownerships

A
  1. Individual accounts
  2. Joint accounts
  3. Trust accounts (per beneficiary)
    4 Self directed retirement accounts
28
Q

Chater 7 Bankruptcy (relief through liquidation)- what debts are not discharged

A
  1. Student/ government loans
  2. 3 years of back taxes
  3. Alimony & Child support
  4. Money owned due to malicious acts
  5. debts related to fraud
29
Q

Chater 7 Bankruptcy (relief through liquidation- what property is exempt from creditors

A

homestead, life insurance, qualified plans, IRA’s up to 1,512,350, rollover IRA has unlimited protection. NOT INHERITED IRA’S

30
Q

Chapter 11- Bankruptcy

A

provides relief through reorganization through businesses or self employed

31
Q

Chapter 14- Bankruptcy

A

provides relief through adjusting debts

32
Q

FICO credit score range and target score

A

scores range from 350-850. the goal is a 760 or higher

33
Q

Calculate housing ratio- 28%

A

Monthly housing costs (principal, Interest, Taxes(property), Homeowners insurance) / Monthly gross income

34
Q

Calculate housing and all other debt ratio- 36%

A

Monthly housing costs (P+I+T+I) + all other recurring debt payments / Monthly Gross income

35
Q

when are students considered independent?

A

over age 23, married, working on masters/ doctorate, legal dependents, veteran of the US armed forces

36
Q

financial aid programs

A

federal pell grant, stafford loan, (PLUS) parent loan for undergraduate students, Grad PLUS loan,

37
Q

need based financial aid programs

A

federal pell grant, subsidized stafford loan,

38
Q

financial aid programs for undergrad only

A

federal pell grant, PLUS loan,

39
Q

tax advantaged plans for education savings

A

qualified state tuition plans (prepaid tuition, 529 plan, 529A ABLE), coverdell education savings acc, roth ira,EE bonds, UGMA

40
Q

Asset of parent accounts in determining financial aid

A

prepaid tuition, 529 savings plan, coverdell (ESA),

41
Q

Details of Life time learning credit

A

for undergrad or grad, up to 2,00 per year per family, 20% of up to 10k of expenses.

42
Q

Details of American Opportunity Tax Credit

A

for undergraduate only, up to 2,500 per person per year, 100% of first 2000 of expenses and 25% of second 2000

43
Q

Employer assistance amount excluded from income

A

an employer can pay or reimburse an employee for education expenses up to 5,250

CFP (5 decks)

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