General Principles Flashcards
Heuristic
“A strategy that ignoes part of the information, with the goal of making decisions quickly, frugally, and/or accurately than more complex methods”
experiences and biases
quantitative data vs qualitative data
quantitative data is CERTAIN vs qualitative data which is more subjective/based on feelings
what should you do if a client wants to use unrealistic retirement income in projections
Run the projections using only conventionally accepted return assumptions
learning about the client’s health should help the financial planner determine
retirement needs
life insurance needs
disability needs
estate tax consequences
presumptive bar list
Two or more personal or business bankruptcies.
Revocation or suspension of a non-financial professional (e.g. real estate, attorney) license, unless the revocation is administrative in nature, i.e. the result of the individual determining not to renew the license by not paying the required fees.
Suspension of a financial professional (e.g. registered securities representative, broker/dealer, insurance, accountant, investment advisor, financial planner) license, unless the suspension is administrative in nature, i.e. the result of the individual determining not to renew the license by not paying the required fees.
Felony conviction for non-violent crimes (including perjury) within the last five years.
Felony conviction for violent crimes other than murder or rape that occurred more than five years ago.
investment company act of 1940
authorized the SEC to regulate unit investment trusts (UITs) and managed investment companies
FDIC insurance categories
Individual accounts
joint accounts
revocable trust
IRAs and Keoghs
investment advisors act of 1940
defines the role and responsibilities of an investment adviser/advisor
authorized the SEC to monitor those who advise pensions, individuals, and institutions on investing
steps for needs analysis for college funding
Step 1: Determine the cost of the first year of college
Step 2: Determine the amount that must be available when the child is age 18
Step 3: Determine how much parents need to save
Education gifts of future vs present interest
UGMA/UTMA Coverdell and 529s are gifts of present interest
taxation of compensatory damages
if for personal physical injury then TAX FREE but interest paid is taxable
Damages received in discrimination or other non physical injury cases are taxable (however medical care expenses attributable to emotional distress are tax free)
when does the business cycle peak?
when business activity ages which means that the public stops buying because they have enough of everything they need
step up in basis for divorce
TRICK QUESTION there isn’t a step up in basis if divorce
what should you advise if there is a period of declining interest rates
move from short term to long term bonds to lock in higher coupons and generate profits in bond portfolio
ADV Part 1
applicant
background of applicant locations
form of business
disciplinary action
investment philosophy
annual updates with the SEC
Series 7 vs Series 6
series 6: mutual funds, uits, and variables
Series 7: general securities (UITs on the secondary market)
FINRA Arbitration
Arbitration with the Financial Industry Regulatory Authority (FINRA) is a way to resolve disputes between investors and brokers, or between brokers and their employees, without going to court.
Obligation of the agent to the principal
an insurance agent represents the insurance company
any information given to the agent of an insurance company by an applicant or insured is considered to have been given to the insurer
the agent must be loyal to the company
coordination of education vehicles for the exam
1st line and then 2nd line of defense
1st - AOC,LLC,Coverdell,529
2nd - Gifts, earnings, UGMA/UTMA/2503(c)
fiscal policy
federal taxation and spending intended to even out the business cycle
monetary policy
FOMC
tools of the FOMC
reserve requirements
discount rate
open market operations
discount rate
rate the federal reserve charges its member banks to borrow to satisfy reserve requirements
who regulates the requirements for disclosure via ADV?
SEC
Series 6
Mutual funds
UITs (only new)
variables
Series 7
general securities (UITs on the secondary market)
chapter 7 bankruptcy typical exemptions
some limited personal property
some limited personal property
equity in a motor vehicle
wages due to head of family
pension and retirement plan rights
cash value of life insurance/proceeds of annuity contacts/disability benefits
what is NOT cancelable by bankruptcy
student loans
child support
taxes
govt laons
alimony
revocation of the CFP marks
permanent
