Fundamentals & Insurance: Client Psychology

Question 1

Compulsive Buying Disorder

Answer 1

excessive shopping/spending that can lead to financial distress. Shopping can stem from negative feelings in one’s life. Buying is a ST positive feeling that can temporarily mask the negative feelings. High credit card debt is a signifier

Question 2

Hoarding

Answer 2

Accumulating and not being able to discard possessions that others would find worthless. This creates clutter and negatively effects home and work space. This could also be associated with unwillingness to spend money after becoming successful. This may come with an irrational fear of running out of money, found often if the individual had been raised in poverty

Question 3

Gambling

Answer 3

recognized mental health disorder associated with the highs and lows of winning and losing.

Question 4

Workaholism

Answer 4

associated with anxiety or depression. fears not having enough money. Focuses on their career at the expense of their family an friends.

Question 5

Financial Enabling/Dependence

Answer 5

when money is used as a form of control. Used to keep people dependent. Seen with successful parents who continue to pay for their kids’ expenses after they should be financially independent, which deprives the kids of developing their own financial acumen.

Question 6

Common sources of money conflict

Answer 6

1. Financial Infidelity/lack of transparency
2. Savings
3. Spending
4. Priorities
5. Requests for assistance from family and friends
6. Financial Enmeshment
7. Undue influence, control and abuse

Question 7

Financial Infidelity/lack of transparency

Answer 7

identified by one individual spending significant amounts of money without the knowledge and support of the spouse. becomes problematic when spending incurs large amounts of debt.

Question 8

Savings

Answer 8

not having common savings goals can derail LT savings plans

Question 9

Spending

Answer 9

differences in determining needs vs. wants can rise to points of conflict

Question 10

Priorities

Answer 10

family time vs. work time or other basic needs such as preferences on where money should be utilized can lead to conflict

Question 11

Requests for assistance from family and friends

Answer 11

conflicts that arise between family or spouses sacrificing one’s financial well-being while succumbing requests for financial assistance from others can lead to strained relationships and strained bank accounts.

Question 12

Financial Enmeshment

Answer 12

an adult involving children in adult financial decisions and conflicts when the child is not emotionally, and cognitively prepared to cope with such decision and conflict

Question 13

Undue influence, control and abuse

Answer 13

exerting control over financial decisions when one spouse or fam member controls the income

Question 14

4 categories of info gathered by the planner

Answer 14

1. lists of assets and liabilities
2. dollar values
3. ownership info
4. contractual agreements

Question 15

Examples of assumptions and estimates

Answer 15

• life expectancy, inflation rates, other material assumptions and estimates, tax rates, investment returns

Question 16

Qualitative Info

Answer 16

• health, life expectancy, family circumstances, values, attitudes, expectations, earnings potential, risk tolerance, goals, needs, priorities, current course of action

Question 17

Quantitative Info

Answer 17

• age, dependents, other advisors, income, expenses, cash flow, savings, assets, liabs, liquidity, taxes, EE benes,
• anything with a #

Question 18

Clients SOLE responsibility

Answer 18

to either ACCEPT or REJECT recommendations

once accepted, planner can implement

Question 19

breaking of supervision duty

Answer 19

• if CFP professional goes on a vaca and turns all client info to an intern to maker recommendations

Question 20

prohibition on circumvention

Answer 20

• cant have someone else do your dirty work for you

- cannot indirectly violate the code and standards

Question 21

3 types of adverse conduct

Answer 21

• unacceptable
• presumed to be unacceptable
• other conduct that may reflect adversely upon the individs integrity, fitness or profession

Question 22

conduct that will ALWAYS BAR from becoming certified

Answer 22

• felony/conviction of theft or embezzlement or murder or rape
• tax fraud
• financial crimes
• violent crime within past 5 years
• revocation of a financial professional license

Question 23

conduct that is a PRESUMED BAR

Answer 23

• 2+ personal bankruptcies
• violent crimes other than murder or rape that occurred 5+ years ago
• nonviolent crimes (purjury) within the last 5 years
• revocation/suspension of a NON financial professional license
• suspension of a financial professional license

Question 24

Exemptions to registration

Answer 24

• VIPs
• VENTURE capital funds
• advisers whose only clients are INSURANCE COMPANIES
• advisers solely to PRIVATE FUNDS less than $150M
• foreign advisers w/o a place of biz in the US

Question 25

Brochure Rule

Answer 25

requires written disclosure to every client of:

• advisory services and fees
• types of securities
• education and biz standards
• participation/interest in securities transactions
• conditions for managing accounts
• must be given AT or BEFORE entering the contract
• accomplished by providing client with ADV Part 2

Question 26

Series 6

Answer 26

• MFs, UITs, variables (life insurance and annuities)

Question 27

Series 7

Answer 27

• everything except commodities and futures