General Practice Flashcards
GP Ch 1 List the financial planning process.
- Understanding
- Identify and Select Goals
- Analyze
- Develop
- Present
- Implement
- Monitor
GP QUIZ 2 What must a CFP professional provide in writing and what can be written/orally provided?
Written or orally- Material conflicts of interest.
Written- Firms privacy policy, compensation, any bankruptcies or disciplinary action.
GP Quiz 2 What dovetails with the steps of the financial planning process?
The Practice standards - it explains how to perform each step of the financial planning process.
GP Quiz 2 How is a Fee Based planner compensated?
Fees and commission
GP 3-2 What’s on a cash flow statement?
Inflows- Outflows =Savings
GP 3-9 Checking account 3k, money market 12k, 401k 50k, Muni Bond 20k, credit card debt 5k, mortgage 50k…what’s the current ratio?
7….Bond is included as current asset
GP 4-3 Invested 25k in a mutual fund. Earns 12% annual rate compounded monthly. 5 years. What will the amount be at end of 5 years?
$45,417.42
GP 4-7 Calculate Real Rate of return
1+ after-tax return/1+ inflation rate then subtract 1 then multiply by 100
GP 4-10 Positive cash flow 6k,7k, 8k, over a 3 year period. Then at the end of 3 years sold it for 115k. Requires 12% return. What should he pay for investment?
98,486.47
0cfj, 6,000cfj, 7000cfj, 123000cfj, 12 I/YR, Gold NPV
GP 4-13 if NPV is equal to zero and 12% was the required rate of return. What can you conclude?
IRR is 12%. NPV is zero which means the IRR equaled the required rate.
GP 4-14 clients want to retire in 10 years. Current portfolio 1 million. During retirement they will draw 150k per year for 25 years then pass away with 1 million. What is the return they need to achieve?
6.88%
-1millionCfj, 0cfj, 10 good Nj, 150k Cfj, 25 good nj, 1 million cfj, Gold IRR/yr
GP 6-6 What is the maximum amount 1 grandparent can contribute in 1 year to a 529? How about both?
90k, 180k
GP 6-7 What is the maximum amount that can be contributed on behalf of a child from all sources combined into a Coverdell ESA?
$2000
GP 6-9 For ESA plans. When must the funds be used by? What is the phaseout? What expenses can it be used on?
Age 30, 190k- 220k MFJ, Elementary and secondary needs as well as college
GP 6-9 How is the gift to an ESA considered ? (Present or future interest?
Contributions are considered a gift if present interest
GP 6-10 UTMA/UGMA accounts. Which one can hold real estate?
UTMA
GP 6-17 Due to coordination rules in education planning. What combination of plans should you not choose?
Don’t select answers that include American opportunity credit, lifetime, coverdell ESA, or qualified tuition distribution. (In the same year)
GP Ch 6 quiz. Kid is 2. Will attend 4 year college. 12,500 in todays dollar costs. 8% investment yield, 5% inflation on college costs for 20 years. What is the lump sum needed now to fund college?
30,555
1- 12,500, 16yrs, 5% = 27,285.93
2- 27,285.93 2.8571%, 4yrs = 104,679.76
3- 104,679.76, 16yrs, 8% = 30,555
GP 7-13 CPI or PPI, which one leads the other?
PPI leads CPI
GP Quiz 7 What is an example for qualifying for compensatory damages?
Age discrimination
GP Quiz 7 Work related payout compensatory damage of 1 million. Settlement awarded in a single premium annuity. How is this taxed?
100% excludable because it’s a single premium annuity that a party is obligated to pay.
GP quiz 7 Lottery payout chosen as annuity payout. How is it taxed?
The payment received each year
GP quiz 7 What are some economic indicators.
SNP 500, supplier delivery days, initial unemployment claims. Yield curve isn’t
GP 8-3 client obtains 100k 15 yr fixed 7.5% interest loan. How much interest will be paid during the life of the loan?
$66,861
12 gold P/yr, PV -100k, 7.5% I/yr, 15gold xp/yr, PMT?
$927.01x180 then subtract 100k
GP Quiz 9 If adviser doesn’t charge commission and gives advice and charges a fee. How must he register?
As and IAR. Doesn’t need to register with FINRA
GP Quiz 9 what does ADV Part 1 entail?
The applicants business address and background. Part 2 spells out compensation.
GP Quiz 9 Which act requires persons or firms advising others about securities investments must register with the securities and exchange commission?
The Investment Advisers Act of 1940
GP Quiz 10 What is written, explicit direction from the insurance company to the agent described as?
Express authority
GP Quiz 10 The term that describes the obligation of the agent to the principal?
Loyalty, Express
Rev. GP A CFP certificate shall notify the CFP board of a reportable matter within how many days?
30
Rev GP Paula stone spent nearly a year and a half completing the CFP education courses and finally passing the exam. Upon submit talk of her paperwork, the CFP board found cause to suspend issuance of the CFP certificate for 2 yrs. Will the board publish such a suspension?
Yes, suspensions are automatically published.
GP 2-1 which standard of conduct?
Hold the interests of the client above those of the planner and the firm.
Duty of loyalty
GP 2-1 Which standard of conduct?
Balance conflicts of interest so as to maintain the clients best interest above all.
Duty of loyalty
GP 2-1 Which standard of conduct?
CFP professional is required to act with the skill, prudence and diligence of a prudent professional in consideration of the clients goals, risk tolerance, and personal circumstances.
Duty of Care
GP 2-1 Standards of conduct? CFP professional is required to comply with the clients instructions, objectives, policies, and restrictions presuming they are reasonable and lawful.
Duty to follow client instructions
GP 2-2 Which conduct standard?
Deceive or defrauded clients, make untrue statements, Omit a material fact in order to mislead a client, encourage any business act that would operate as a fraud or deceit upon anyone
The integrity standard
GP 2-3 What conduct standard? Provide professional services with relevant knowledge and skill. Recognize lack of k college in an area and obtain assistant of another professional, refer the client to one or more professionals, limit or terminate the engagement.
The competance standard
GP 2-3 Conduct Standard? Provide services in a professional manner. Respond to reasonable client inquiries and requests in a timely fashion.
The diligence standard
GP 2-3 Conduct Standard? Make full disclosure of all material and conflicts of interest that could affect the planner/client relationship. Disclose information relating to conflicts of interest in sufficient detail and understandable language. Detailed disclosure
The standard to disclose and manage conflict of interest.
GP 2-3 When should disclosure of conflicts of interest be disclosed?
Prior to the time in which financial advice is given.
GP 2-4 Conduct Standard? Exercise professional judgment that holds the clients best interest above that of the planner and/or firm. Refuse any gift, gratuity, cash or non cash consideration/payment that could compromise the CFPs professional objectivity.
The sound and Objective professional judgement standard
GP 2-4 Which conduct standard? Treat others with dignity, courtesy, and respect. This includes clients, prospective clients, colleagues and the public in general.
The professional standard
GP 2-4 Which conduct Standard? Comply with laws and rules that apply to the professional services of a financial planning practitioner and or may not intentionally or recklessly participate or assist in another persons violation of such standards, regulations, and rules.
The Standard to Comply with the Law
GP 2-4 Conduct Standard? Maintain confidentiality regarding non public personal info pertaining to clients. Recognize the circumstances under which client info may be shared with others.
The confidentiality and Privacy Standard
GP 2-5 SEC Regulation S-P
Notice requirements and restrictions on a financial institutions ability to disclose non public info about consumers. Must provide a notice of privacy.
GP 2-22 A CFP professional would be required to notify his or her firm of the following forms of discipline except: private censure, letter of admonition, suspension, revocation of the use of the CFP Marks.
Private censure. Must notify my employer regarding PUBLIC disciplinary actions by the CFP board. Private censure is not shared with the public by the board. The others are public.
GP 2-25 What are some public disciplinary actions the DEC can impose?
In order of severity
A public letter of admonition, suspension for up to 5 years, or permanent revocation of the marks.
GP 2-25 what are some private disciplinary actions the DEC could take?
Requirement for additional continuing education and or private censure citing the Practice Standards Violation.
GP Final Watkins obtain a mortgage on their new home for 100k. The 30 yr mortgage payment will be 700/mo. How is this transaction reflected on the clients financial statement? Assets will increase, liabilities will decrease, net worth will increase, cash outflows will decrease.
Assets will increase
GP Final. Client has a child that’s 19 years old and about to start college. Client would like to contribute to a coverdell ESA. Whats the issue?
Kid is over 18
GP final. Six years ago, Mrs chambers took a reverse mortgage to supplement her retirement income. Over the years her health deteriorated and she died. She has 3 grown children. Are her children responsible for the selling of the house and paying off her balance?
Yes, they could sell the house or refinance to pay off the balance of the reverse mortgage
GP Final. Barry is registered rep of a major security firm. He gives on stocks and bonds and gets a commissions on sales. Larry is a CFP and cpa, does financial planning. Who needs to register as an investment advisor?
Barry doesn’t because he’s affiliated with a broker dealer and doesn’t specifically charge for planning. Larry has to register.
GP Final Can a CFP certificate commingle client funds with the funds of the financial planning firm?
No, because it’s a financial planning firm. But checks can be made out to the broker dealer or custodian
GP Final Is it up to the CFP professional to set realistic goals?
No it’s on the client to decide on the goals.
GP Final John and Mary took out a 142k 30 yr loan 5 yrs ago. The interest rate was 9%. They are now considering refinancing. They can obtain a 7.2-% 15yr loan on 136,150 and pay 2000 in points from their fund. What are the monthly payments?
1,239.03
