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CFP TL VERSION > General PRINCIPLES > Flashcards

General PRINCIPLES Flashcards

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1
Q

Education funding options before college

A
  1. UGMA/UTMA
  2. EE BONDS
  3. COVERDELL ESA
  4. 529 PLAN OR 529 PREPAID TUITION
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2
Q

Education Saving Methods or Techniques

A

Coverdell
UGMA/UTMA
Tax-free Munis
Savings bonds

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3
Q

Domains of financial planning process

A
  1. Establish and define relationship.
  2. data gathering
  3. Analyze and evaluate
  4. Develop reccs
  5. Communicate reccs
  6. Implement reccs
  7. Monitor reccs
  8. Practice within professional and regulatory standards
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4
Q

What are the 7 principles

A

IOC/FCPD

  1. Integrity
  2. Objectivity
  3. Competence
  4. Fairness
  5. Confidentiality
  6. Professionalism
  7. Diligence
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5
Q

6 Rules of conduct

A

RIPOOO

  1. Define relationship
  2. Information disclosure
  3. Property
  4. Obligation to clients
  5. Obligation to ER
  6. Obligation to CFP BOARD
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6
Q

Debt MGMT Ratios

A 
PITI = 28% of gross income
Tot. Mo. Debt = 36%
Consumer Debt (CC) = 20%
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7
Q

Calculations in BEGIN mode

A

College tuition
Retirement benefits
Family needs

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8
Q

Calculations in END mode

A

401k deferrals
PS contributions
Bond interest
Mortgage pmts

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9
Q

What is IRR?

Ya 1 mkt value = $100k
WD end of year 1 = $4k
“              “ year 2 = $5k
“              “ year 3 = $6k
Mkt Value end of yr 3 = $120k
A

Hint: distribution are positive cas flow.

100,000 CHS g CFo
4000 g CFj
5000 g CFj
126,000 g CFj
fIRR =10.92%
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10
Q

Securities act of ‘33

A

Regulated IPOs

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11
Q

Securities act of ‘34

A

Regulated secondary markets and created the SEC

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12
Q

Investment company act of ‘40

A

Allowed SEC to regulate mutual funds (UIT, closed-end, open-ended) & variable life and annuities

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13
Q

Securities investors act of ‘70

A

Established the SIPC to insure against brokerage firm losses.

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14
Q

UGMA vs UTMA

A

Investments: EE bonds, stocks, MFs, CDs, etc vs same plus RE or LP

TOA to child: 18 or 21 vs up to 25

Gift tax: gif of present value for both

Taxation: both subject to kiddie tax under age 24

Financial aid: asset of child for both.

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15
Q

Fiscal policy

A

Refers to federal taxation and spending

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16
Q

Monetary policy

A

Action taken by the fed reserve to influence the growth of the money supply

Reserve requirements

Discount rate: rate charge to bank to borrow reserves

Open mkt operations: repo = buys bonds vs reverse-repo = sell bonds

Margin: sets margin rates

17
Q

Leading economic indicators

A 
Unemployment claims
New manufacturing orders
New private housing units
Stock prices
Index of consumer expectations
18
Q

Coincident indicators

A

Industrial production
Number of EE non-agriculture
Personal income less transfer pmts

19
Q

Business Cycle

A
  1. Expansion
  2. Peak
  3. Recession/contraction
  4. Trough
  5. Recovery/expansion
20
Q

What is inflation

A

Rise in the price of goods and services

21
Q

What is deflation?

A

Decline in prices of goods and services

22
Q

What is stagflation?

A

Combination of slow economic growth and high unemployment

23
Q

What is disinflation?

A

Inflation starts to decrease but prices of goods and services are still going up.

Ex: inflation is 1% vs 2% the yr before

24
Q

How much int was paid in first 10 yrs of a 30-yr, $80k mortgage at 9.75% int rate and monthly pmts?

A 
Step 1: calculate pmts
$80,000 CHS PV
9.75 g I
30 g N
PMT = $687.32
Step 2:
f clear
9.75 g I
80,000 PV
687.32 CHS PMT
120 f AMORT = 1st 120 mos. interest (74,942)
X>
25
Q

Exceptions to filing as investment adviser

A

BLAT Incident

  1. Bank
  2. Lawyer
  3. Accountant
  4. Teacher
  5. Solely incidental to practice or commission only
26
Q

What’s does ADV Part 1 include

A

General information:

  1. Applicant
  2. Background of applicant/adviser
  3. Location
  4. Form of business
  5. Disciplinary action
  6. Investment philosophy
27
Q

Series 6 license

A

Sell MFs, UITs, variable life and annuities

28
Q

Series 7 License

A

Sell stocks except commodities and certain options

29
Q

FINRA Registration procedures

A
  1. Associate w/ B/D
  2. Register with FINRA with U-4
  3. Pass exams
  4. Register with CRD system
30
Q

Expressed authority

A

Written, explicit direction from principal

31
Q

Implied Authority

A

Authority the agent has to carry out the principles business in accordance with general business practices

32
Q

Apparent Authority

A

Negligence of the principal in allowing agent to appear to have authority.

Ex: term EE writes business on applications not confiscated from EE.

33
Q

Chapter 7 Bankruptcy

A

Exemptions: homestead, ERISA assets, CV life insurance, TIC property, disability and workers comp

Mom-cancelable debts

  1. Student and gov’t loans
  2. Income taxes
  3. Child support or alimonya
34
Q

American Opportunity Credit

A

$2k plus 25% of next $2k in edu expenses

Eligible for 1st four years of college

Phaseout 160k-180k

35
Q

Lifetime Learning Credit

A

$2k max for undergraduate expenses

Married phaseout: 114k-134k

36
Q

Graduate Edu expense funding options

A

Fullbright scholarship: grants and scholarships

Perkins Loans: college decides if student needs the loan

Stafford loans: must show financial need

529

Coverdell

37
Q

Education coordination rule

A

Don’t use combination of American opportunity, lifetime learning, coverdell, or qualified edu distribution.

CFP TL VERSION (6 decks)

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