Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

J’s CFP Review > General Principles > Flashcards

General Principles Flashcards

You may prefer our related Brainscape-certified flashcards:
CFP® flashcards
1
Q

Code of Ethics

A

“AAAA ME”

Act with honesty, integrity, competence, and diligence
Act in client’s best interest
Act in a manner that reflects positively on the FP profession and the marks
Avoid or disclose and manage conflicts of interest

Maintain the confidentiality and protect the privacy of client info
Exercise due care

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Standards of Conduct

A

A. Duties Owed to Clients
B. FP & application of the Practice Stds for FP process
C. Practice Stds for the FP process
D. Duties Owed to firms and subordinates
E. Duties owed to CFP Board
F. Prohibition on circumvention

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Duties Owed to Client

A
  • 15 in total | “FDIC COP” for most popular

Fiduciary Duty
Diligence
Integrity
Confidentiality & Privacy

Competence
Objectivity
Professionalism

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Duties when representing compensation method (A.12)

A

Fee-Only - receive compensation solely from the fees clients pay from their services

Fee-Based - compensation via fees and other sources, (e.g., commissions)

Sales-related Compensation - compensation that provides incentives for the purchase or sale of financial assets, thereby presenting a conflict of interest

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Fiduciary Duty (A.1)

A

Duty of Loyalty - place interest of client above all else; avoid conflicts of interest and or disclose; act w/o regard to the financial interests of self, firm, or others

Duty of Care - act with care, skill, prudence, and diligence that a prudent professional would exercise

Duty to Follow Client Instructions - comply with the terms of the client engagement and follow all directions of the client that are reasonable and lawful

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Financial Advice

A

Comments that based on its content/context/press, would reasonably be viewed as rec’ that a client take or refrain from taking a particular COA

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Financial Planning

A

Collaborative process that helps maximize a clients potential for meeting life goals through Financial Advice that integrates relevant elements of the client’s person and financial circumstances

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Stds of Conduct - Integrity

A

Focus on “candor and honesty”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Stds of Conduct - Duties Owed to Clients - Diligence (A.4)

A

“…must provide professional services, including responding to reasonable client inquires, in a timely and thorough manner.”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Financial Planning Process

A

“Ukuleles In A Dive-bar Playing Iron Maiden”

Understand client’s personal and financial circumstances
Id and select goals
Analyze current COA and potential COAs
Develop FP rec’s
Present FP rec’s
Implement FP rec’s
Monitor progress and update

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Fitness Stds - Conduct Deemed Unacceptable
(permanently barred)

A

Felony conviction - theft or other fin crimes
Felony conviction - tax related crimes
Felony conviction - murder or rape
Felony conviction - any other violent crime w/in last 5 yrs

Revocation of financial prof licenses for any reason other than personal decision

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Fitness Stds - Conduct Deemed Presumptive Bar
(presumed unacceptable -> proceed to DEC)

A

Felony conviction - non-violent crimes w/in last 5 yrs
Felony conviction - violent crimes other than murder/rape 5+ yrs ago

2+ personal or biz bankruptcies
Revocation or non-financial prof licenses for any other reason beyond personal decision
Suspension of financial professional license except for something admin in nature

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Fitness Stds - Other Adverse Conduct
(proceed to DEC)

A

Other conduct that reflects negatively on person and or marks…
-Customer complaints
-Arbitration/civil proceedings
-Misdemeanor convictions
-Employer investigations
-Felony conviction - non-violent crimes greater than 5 yrs ago

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

DEC Forms of Discipline

A

“PPSR”

Private censure: unpublished written reproach mailed by the DEC to individual
Public letter of admonition: written reproach of individual’s behavior published in a press release
Suspension: respondent is prohibited from using CFP marks; min 90 days to 5 years
Revocation: termination of individuals rights to use CFP marks; permanently barred

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Business Cycle

A

Points: Trough & Peak

Phases: Expansion & Contraction

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Business Cycle Phases

A

Expansion: increasing GDP and decreasing unemployment

Contraction: decreasing GDP and increasing unemployment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Business Cycle Points

A

Peak: very high GDP and peak unemployment (very low)

Trough: very low GDP (or negative GDP) and high unemployment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Business Cycle & Inflation

A

Inflation increases throughout expansion phase and remains high during contraction where credit dries up, profits decline, policy eases, and inventory/sales fall

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

GDP Formula

A

GDP = Consumer spending + Industry investment + Govt spending + (Exports - Imports)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Real GDP

A

Includes:
-Mkt value of all final goods and services produced w/in an economy
-Income of foreigners working in US
-Profits of foreign companies operating in US

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Real GDP

A

Excludes:
-Imports
-Inflation
-Transactions where no new goods/services are produced
-Income of US citizens living abroad
-Profits of US companies operating abroad

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Price Elasticity - Elastic

A

Quantity demanded responds GREATLY to price changes
-e.g. a very tight rubber band

Theory is everything become elastic over the long run

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Price Elasticity - Inelastic

A

Quantity demanded responds LITTLE to price changes
-a very loose rubber band
-e.g. gasoline

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Law of supply and demand

A

As the price increases, supply rises while demand declines. Conversely, as the price drops supply constricts while demand grows.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Fiscal Policy

A

Congress controls fiscal policy

Tools:
(1) Govt Spending - promote economic growth through spending
(2) Taxation - increases in tax reduces disposable income / decreases in tax increases disposable income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Deficit spending

A

Govt expenditures exceed revenues generated.

Govt will sell Treasury Securities. Those securities compete with other issuers of debt securities driving values lower.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Monetary Policy

A

Controlled by Federal Reserve Bank (the Fed)

Tools:
(1) Discount rate - rate at which member banks borrow from govt
(2) Open marketing operations - buy and sell securities
(3) Reserve requirements - % of deposits that must be held in reserve

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Contractionary or Tight Monetary Policy

A

Increase discount rate
Increase reserve requirements
Sell securities

These actions slow down or cools the pace of growth

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Expansionary or Easy Monetary Policy

A

Lower discount rate
Lower reserve requirements
Buy securities

These actions increase the pace of growth and stimulates the economy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Statement of Financial Position

A

Aka Balance Sheet
Assets = Liabilities + Net Worth

Items always listed at fair market value

Assets listed in order of liquidity, highest to lowest

31
Q

Statement of Cash Flow

A

Starting point: Net income
Ending point: Cash balance

32
Q

Financial Ratios

A

“LAPD” - four categories

Liquidity - determine the ability to meet short-term obligations
Activity - determine the relative efficiency of fin mgmt
Profitability - measure relative profitability
Debt - determine ability to meet long-term obligations

33
Q

Do you want your Current Ratio to be increasing or decreasing?

A

Current Assets / Current Liabilities = Current Ratio

Increasing.

34
Q

What are the acceptable emergency fund holdings?

A

Cash
Checking/savings
Money market mutual funds
T-Bills
CDs
Cash value life insurance
Lines of credit
Home equity loans

35
Q

FDIC

A

$250k per person, per ownership category, per bank.

36
Q

FDIC - account ownership categories

A

8 total / 5 main account types

Single / Joint / Retirement (IRAs) / Revocable Trusts / Irrevocable Trusts

One single bank could hold $2M in FDIC insurance for one person

37
Q

Chapter 7 - Bankruptcy

A

Think #7 Jalen Brown -> clear the lane -> eliminates all consumer debt

“Liquidation event”

Most debts discharged after 115 days except for: child support, alimony, income taxes less thank 3 yrs past due, student loans, and secured debt

38
Q

Chapter 13 - Bankruptcy

A

Think #13 Delonte West -> just give him time, he’ll figure it out -> Repayment options

Allowed to keep personal assets but obligated to repay debt in full over a certain period

Must have less than $419,275 in unsecured debt, no more than $1,257,850 in secured debt

39
Q

Chapter 11 - Bankruptcy

A

Think #11 Payton Pritchard -> all about that business -> Business reorganization

Secured and unsecured debt all reorganized and paid back over time

40
Q

Consumer Credit Protect Act

A

Right to know costs and terms of credit

41
Q

Equal Credit Oppty Act

A

Right to fair oppty to obtain credit

42
Q

Fair Credit Reporting Act

A

Right to know what’s in your credit file

43
Q

Fair Credit Billing Act

A

Right to have billing mistakes resolved

44
Q

Fair Debt Collection Practices Act

A

Right to be protected from collection agencies

45
Q

Consumer Financial Protection Bureau (CFPB)

A

Implements and enforces Federal consumer financial laws and ensures that markets for consumer financial products are fair, transparent, and competitive

46
Q

FICO Scores

A

Poor. Fair. Good. Very good. Exceptional.
300 - 580 - 670 - 740 - 800 - 850
90 70 60 50

47
Q

FICO Score Calculation

A

“PAL in NC”

Payment history 35%
Amounts owed 30%
Length of credit history 15%
New credit 10%
Credit mix 10%

48
Q

Educational Funding Calc Steps

A

Step 1 = FV: i = education %; inflate annual cost of college from today to future dollars
Step 2 = PV: (BEGIN mode); i = inflation-adjusted: solve for total cost of attendance on Day 1
Step 3 = PV or PMT: i = investment %; solve for amount to cover costs in today’s dollars

49
Q

529s

A

Non-deductible contributions
Contrib’s are completed gifts up to $16 annual exclusion
One person can super fund 5 yrs = $80k or $160 for MFJ
Up to $10k can be used for K - 12
Up to $10k can be used for loan repayment
No time or age restrictions
EFC - counted as a parent’s asset (5.64%)
Nonqualed expenses = 10% penalty & federal tax

50
Q

Coverdell Education Savings Accounts

A

Contrib’s completed gifts up to $16k annually
$2k annual contrib amount per beneficiary
No limit on K - 12 usage
Contribution phase out
EFC - counter as parent’s asset (5.64%)
Nonqualed expenses subject to 10% penalty and federal tax

51
Q

Educational Funding Options

A

In order…

529s
Coverdell Education Savings Account
Series EE Bonds
UTMG/UGMA
Roth IRA
Trad IRA
Mutual Funds

52
Q

529 ABLE accounts below what amount are excluded from EFC calculation?

A

$100,000

53
Q

EFC Formula

A

Cost of Attendance - (Income + Assets) = Financial Need

54
Q

EFC Contribution Amounts

A

Income
Parent: 22% to 47%
Student: 50%

Assets
Parent: 5.64%
Student: 20%

55
Q

What assets are included in EFC formula?

A

Cash, savings, checking, money market funds, CDs
Investments
Rental real estate equity, business, investment farms, trust funds
College savings plans, CESAs, 529s

56
Q

EFC - Student Income Protected Amount

A

First $7,040 protected from student income inclusion in formula

57
Q

American Oppty Tax Credit

A

AOTC -> “All Of The Kids”

No limit to usage on tax return
Up to $2,500 credit per eligible student
40% of credit refundable up to $1000
Does not apply towards room and board

58
Q

Lifetime Learning Credit

A

LLC
Up to $2k per return
Not refundable
Student does not need to be pursuing a degree

59
Q

AOTC & LLC MAGI Limits

A

MFJ = $180,000

Single = $90,000

60
Q

AOTC Formula

A

100% of first $2,000
25% for next $2,000
For a total of $2500

61
Q

CFP continuing education req’s

A

30 hours every two years

62
Q

Code of Ethics - 15 principles

A

Fiduciary Duty
Integrity
Competence
Diligence
Disclose and Manage Conflicts of Interests
Sounds & Objective Prof Judgment
Professionalism
Comply with the Law
Confidentiality and Privacy
Provide Information to Client
Duties When Comms with a Client
Duties When Representing Compensation Method
Duties When Rec’d, Engaging, and Working with Addtl Persons
Duties When Selecting, Using, and Rec’d Tech
Refrain From Borrowing or Lending Money & Commingling Financial Assets

63
Q

529 taxation for unqualified withdrawals

A

If money was not used to pay education expenses, gains from a 529 plan are taxed as ordinary income and a 10% penalty is applied.

64
Q

Stafford Loans are administered by who?

A

Federal Family Education Loan Program

65
Q

To be eligible for Perkins Loans, what must your student status be?

A

Full-time or part-time

66
Q

FINRA was created via the merger between what two organizations?

A

Enforcement divisions of the NYSE and National Association of Securities Dealers

67
Q

Which principle?

“CFP professional must act with the care, skill, prudence, and diligence that a prudent professional would exercise in light of the Client’s goals, risk tolerance, objectives, and financial and personal circumstances.”

A

Fiduciary Duty -> Duty of Care

68
Q

What is an unconditional promise to pay a sum of money to a payee under specific terms?

A

Promissory note

69
Q

Glass-Steagall Act of 1932 was ultimately overturned by what legislation?

A

Gramm-Leach-Bliley Act

Ensured the separation of banking, insurance, and securities sales in the US

70
Q

For an IRA, max amount of AUM before having to register with the SEC

A

$100M

71
Q

US Treasury guarantees that an EE bond will double within _____ years.

A

20

72
Q

Essential trait of any professional and involves a subordination of one’s own feelings, prejudices, and desires to achieve a proper balance of conflicting interests

A

Fairness

73
Q

Fee-only

A

Only in:

-The CFP receive no sales-related comp, and
-Related parties receive no sales-related comp in connection with any professional services the CFP or firm provides to clients

74
Q

Violation of fee-only comp

A

Paid for a,
-referral fee
-commissions
-per trade basis

J’s CFP Review (7 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions