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Clark's Cards > General Principles > Flashcards

General Principles Flashcards

1
Q

The CFP Board was founded in what year?

A

1985

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2
Q

Within how many days must a CFP inform the CFP Board of an address change?

A

30 days

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3
Q

How many CE hours per reporting period are required?

A

30 hours

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4
Q

The CFP Commission can order a license suspension not to exceed ___ years.

A

5

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5
Q

Responses to complaints shall be in writing and

submitted within ___ calendar days.

A

30

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6
Q

Evidence in support of an investigation may be submitted up to ___ days prior to the scheduled hearing.

A

45

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7
Q

Use of Initials

Registered Investment Advisor and

Certified Financial Planner

A

NO:

  • RIA
  • C.F.P.

YES:

  • Registered Investment Advisor
  • CFP®
  • CERTIFIED FINANCIAL PLANNER™
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8
Q

When can a CFP® licensee release client information to other persons?

A
  • When an attorney or court subpoenas the information
  • At the client’s request
  • As a defense against charges of wrongdoing
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9
Q

Determining the Release of an Emergency Fund

(Use 3 or 6 months if…)

A

3 months if:

  • Single with 2nd source of income
  • Married, both work
  • Married, only 1 spouse works, but have a second source of income ​

6 months if:

  • Single wage earner
  • Married and only 1 spouse works
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10
Q

How much consumer debt is considered acceptable?

A

≤20% of NET income

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11
Q

How much Total Monthly Debt is considered acceptable?

A

≤36% of GROSS income

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12
Q

How much PITI is considered acceptable?

A

≤28% of GROSS income

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13
Q

Current Ratio

A

Current Assets ÷ Current Liabilities

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14
Q

Current Assets

A
  • Cash Equivalents
  • Marketable Securities
  • Accounts Receivable
  • Inventory
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15
Q

Current Liabilities

A
  • Accounts Payable
  • Credit Card Debt
  • Taxes Payable
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16
Q

Securities Act of 1933

A

The Securities Act of 1933 required that new issues purchasers be provided a detailed prospectus before the purchase was completed.

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17
Q

Securities Act of 1934

A

The Securities Act of 1934 was passed to regulate the secondary market (the trading of issued securities). The act also created the SEC to enforce securities laws.

18
Q

Investment Company Act

of 1940

A

Investment Company Act of 1940 authorized the SEC to regulate Unit Investment Trusts (UIT) and managed investment companies (closed- and open-end funds) and variable products.

19
Q

Securities Investors Protection Act of 1970

A

Securities Investors Protection Act of 1970 established the SIPC to supervise securities firms that get into financial difficulties. The SIPC insures investors against losses arising from the failure of a brokerage firm.

20
Q

529 Keys

A
  • Lump sum gift up to $85,000
  • Donor can retain control
  • K-12 for tuition allowed up to $10,000/yr.
  • Can be used to pay student loans ($10,000/student over lifetime)
21
Q

Deductible Housing Interest

A

All mortgages cannot exceed:

  • $750K combined (MFJ)
  • $375K (single/MFS)
  • Home equity interest is only deductible if used for home renovation/improvement.
22
Q

Federal Reserve Open Market Operations

A
  • Repos - Fed buys securities = expansionary/easy money policy
  • Reverse Repos - Fed sells securities = contractionary/tight money policy
23
Q

Gross Domestic Product (GDP)

A

Total dollar value of all goods and services produced within the US only.

  • GDP counts economic activity without regard to yearly price fluctuations.
  • The GDP does not include any income generated outside the US or adjustments for foreign currencies.
24
Q

Business Cycle

A
  • Expansion
  • Peak
  • Recession/Contraction
  • Trough
  • Recovery/Expansion
25
Q

Recession vs. Depression

A

Recession - Two consecutive quarters of economic decline (negative GDP)

Depression - Six consecutive quarters economic decline (negative GDP)

26
Q

Exceptions to Filing as an Investment Adviser

A
  • Banks that are not also investment companies.
  • Lawyers, accountants, teachers where advice is incidental.
  • Broker/dealers or registered reps whose performance is incidental and who get no special compensation for advice.
  • Publishers of bona fide newspapers.
  • Those who give advice solely relating to US government securities.
27
Q

Exemptions to Filing as an Investment Adviser

A
  • Advisers whose only clients are insurance companies.
  • Family office
28
Q

How does an Investment Adviser register with the SEC?

A
  • Initially, file ADV part I and II with the SEC.
  • Pay minimum filing fee of $150
  • RIA must submit part I of ADV and schedule I annually.
29
Q

Financial Industry Regulatory Authority (FINRA)

Initial Registration Process

A
  • The individual associates with a broker/dealer.
  • Registers with FINRA through broker/dealer on form U-4.
  • Takes and passes appropriate exams.
  • Is issued a CRD number (Central Registration System)
30
Q

Financial Industry Regulatory Authority (FINRA)

Key Examinations/Licenses

A
  • Series 6 - Mutual funds, UITs, and variables (only new UITs)
  • Series 7 - General securities (including UITs on secondary market)
  • Series 63 - Uniform Securities Agent State Law Exam
  • Series 65 - Uniform Investment Adviser Law Exam
  • Series 66 - Uniform Combined State Law Exam (combines 63 & 65 exams)
31
Q

Basic Components of a Legal Contract as Applied to Insurance

A
  • Offer and Acceptance - Two parties, offerer and acceptor
  • Consideration - Something of value (money)
  • Legal Object - Legal in purpose
  • Competent Parties - Principle must have legal capacity to execute contract:
    • Intoxicated adults have limited or no capacity
    • Minors only have capacity to contract for necessities (food, clothing, shelter)
  • Legal Form - Contract must meet requirements
32
Q

Law of Agency (Insurance)

A
  • Express Authority - Written, explicit direction from principal to agent
  • Implied Authority - Is that which the public believes the individual holds and includes signage, rate books, etc.
    • Implied is actual authority that the agent has to carry out the principal’s business
  • Apparent Authority - Arises out of negligence of the principal in allowing the agent to appear to have authority because of certain actions of the agent in the past. This typically affects terminated agents.
33
Q

Which debts are not cancelable by Bankruptcy?

A
  • Student Loans
  • Government Loans
  • Child Support
  • Alimony
  • Wage Withholding
  • FICA Taxes
  • Income Taxes Due
  • Rollovers from qualified plans are exempt (unlimited) and non-rollover IRAs up to $1 million are exempt
34
Q

Financial Planning Process - Steps

A
  • UNDERSTAND circumstances
  • IDENTIFY goals
  • ANALYZE current and potential courses of action
  • DEVELOP recommendation
  • PRESENT recommendation
  • IMPLEMENT recommendation
  • MONITOR progress
35
Q

CFP Code of Conduct

A
  • Act with honesty, integrity, competence & diligence
  • Act in client’s best interest
  • Exercise due care
  • Avoid & manage conflicts of interest
  • Maintain confidentiality
  • Positively reflect on profession & CFP
36
Q

The Fiduciary Standard

A

A fiduciary honors the interest of the client above all and owes certain duties to the client

37
Q

Fiduciary Duties

A
  • Loyalty
  • Care
  • Follow Instructions
  • Diligence
  • Disclose Conflicts
  • Sound & Objective Judgment
  • Professionalism
  • Comply with Law
  • Confidentiality
  • Provide Information
  • Fairly Represent Compensation
38
Q

When CFP® marks used in a sentence, must be followed by…

A
  • Certificant
  • Practitioner
  • Professional
  • Certification
  • Mark
  • Exam
39
Q

American Opportunity Credit (AOC)

A
  • $2K + 25% of next $2K of expenses (Max $2.5K)
  • MAGI phase-out (Given)
  • First 4 years of college
  • No Felony Drug Conviction
  • Don’t coordinate w Lifetime Learning Credit, Coverdell or 529 for same expense.
40
Q

Lifetime Learning Credit

A
  • $2K max
  • Any higher learning institution
  • MAGI phase-out (Given)
  • 20% of up-to $10K expenses
  • Don’t coordinate w AOC, Coverdell or 529 for same expense.
41
Q

College
Graduate School

A
  • Fulbright Scholarship
  • Stafford Loan
  • 529 or Coverdell*

*(Don’t coordinate on same expense)

42
Q

Coverdell or 529 Creditor Protection

A

Only $ held for more than 2 years in a Coverdell or 529 is creditor protected.

Clark's Cards (9 decks)

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