Fundamentals Flashcards
Fee-only vs. fee-based
Fee only - not related to transaction
Fee based - combo of transactional & fee only
Relevant misdemeanors
Driving offenses, tickets and misdemeanors that do not involve alcohol or drugs are not considered relevant misdemeanors. A first alcohol or drug misdemeanor is not relevant either.
Tax and financial misdemeanors are almost always relevant
Reporting adverse conduct to CFP board
Focus on common elements of reporting to CFP Board. Reporting must take place 30 days after a CFP® Processional is named, charged, convicted, settled, adversely mentioned in an action, arbitration or civil event.
A CFP® professional should report both the initial charge or investigation as well as its outcome.
Who is an investment advisor?
An investment advisor knows his ABC’s! -> Advice, Business, Compensation
An investment adviser is defined for purposes of the Investment Advisors Act of 1940 as someone who is: (1) in the Business (2) of providing Advice about securities (3) for Compensation.
Exceptions to registration with the SEC
The exception is that TABLEs are incidental! -> Teachers, Accountants, Brokers, Lawyers, and Engineers.
Exemptions from registration with the SEC
Remember that “VIPs are SaFE from exemptions” -> Venture capital, Insurance companies, Private funds less than $150 million, home State, Foreign advisors, and securities not on a national Exchange
Accredited investor
To be an accredited investor you must meet the 1, or 2, 3 test! $1 million (exclusive of personal residence) or $200,000 of annual income last 2 years if single, or $300,000 of spousal income.
What is good debt, reasonable debt, bad debt?
Good debt is anytime the useful life of the asset far exceeds the term of the debt. Good debt includes a 15-year mortgage or 3-year car loan.
Reasonable debt includes a 30-year mortgage or 5-year car loan.
Bad debt includes carrying credit card debt each month
Movement along demand curve vs. shift in demand curve
Movement along demand curve is solely because of price.
Shifts in demand curve-
The demand curve will shift and, thus, create a change in demand due to an increase or decrease in: -Income. - Taxes. - Savings Rate. - Disposable Income.
* Anything that causes discretionary income to increase will shift the demand curve up and to the right
*Anything that causes discretionary income to decrease will shift the demand curve down and to the left
Nondiscretionary expenses - exam tip
Exam Tip
If the CFP® Exam gives you combined fixed and variable expenses rather than nondiscretionary expenses, used the combined fixed and variable expenses as a substitute for nondiscretionary expenses
