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Certified Financial Planner Exam 2021 > General Principles > Flashcards

General Principles Flashcards

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CFP® flashcards
1
Q

Financial advice: what to provide in writing

A

Privacy policy

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2
Q

Financial advice: what to provide orally or in writing

A
  1. Material conflicts of interest
  2. Services and products
  3. How the client pays
  4. How you are compensated
  5. Public discipline and bankruptcy
  6. Referral compensation arrangements
  7. Other material info
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3
Q

Financial planning: what to provide in writing

A
  1. Privacy policy
  2. Services and products
  3. How the client pays
  4. How you are compensated
  5. Public discipline and bankruptcy
  6. Referral compensation
  7. Terms of engagement
  8. Other material info
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4
Q

Financial planning: what to provide orally or in writing

A

Material conflicts of interest

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5
Q

Practice Standards for the Financial Planning Process

A
  1. Understanding the Client’s Personal and Financial Circumstances
  2. Identifying and Selecting Goals
  3. Analyze the client’s current course of action and potential alternatives
  4. Developing Financial Planning Recommendations
  5. Presenting the Financial Plan Recommendations
  6. Implementing Financial Plan Recommendations
  7. Monitoring the Plan
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6
Q

Always bar from CFP Certification

A
  1. Felony conviction of theft, embezzlement, tax fraud, or financial crimes
  2. Murder and rape
  3. Violent crime within the past five years
  4. Revocation of financial professional license
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7
Q

Presumed unacceptable for CFP Certification

A
  1. Two of more personal or business bankruptcies
  2. Felony conviction of violent crime other than murder or rape that occurred more than five years ago
  3. Nonviolent crimes, including perjury, within the past five years
  4. Revocation or suspension of non-financial professional license
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8
Q

What happens during a petition for consideration?

A
  1. Candidate submit written petition and agree to CFP Board’s jurisdiction
  2. Staff makes sure issue falls under “presumed unacceptable” list
  3. If “always bar,” there is no recourse
  4. If “presumed unacceptable,” the Disciplinary and Ethics Commission makes a decision
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9
Q

What happens during Disciplinary and Ethics Commission decision?

A
  1. If candidate is fit, they will get certification.
  2. If the DEC denies the petition, certification is barred.
  3. You can appeal DEC decision to Appeals Committee of the Board of Directors
  4. Decisions are final unless a felony conviction is overturned
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10
Q

How much AUM to register with the state?

A

Less than $100 million

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11
Q

How much AUM to register with SEC?

A

More than $110 million

Between $100 and $110 million, you can choose to register with state or SEC

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12
Q

Eligibility to file petition for fitness determination - reinstatement

A
  • Suspension of more than one year
    - Respondent must file written
    petition for reinstatement
    - Hearing panel and DEC review
  • Decisions are final unless felony conviction is overturned, at which time individual may submit a new petition
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13
Q

Bankruptcy rules for CFPs

A

1st:

  • report to CFP Board within 30 calendar days
  • report to client within 90 days
  • choose public censure or hearing fee to follow adjudication

2nd:

  • Same reporting rules
  • Follows normal disciplinary procedure for adjudicating complaints
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14
Q

Suspension to use CFP marks vs. revocation

A

Suspension - 90 days or five years

Revocation - permanent

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15
Q

Brochure rule

A

Written disclosure for:

  • Advisory services and fees
  • Types of securities
  • Education and business standards
  • Participation / interest in securities transactions
  • Conditions for managing accounts

Must be given to client at or before time of entering into contract

Provide client with ADV Part 2

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16
Q

Series 6

A

Mutual funds, UITs, variables (life insurance and annuities)

17
Q

Series 7

A

Everything except commodities and futures

18
Q

Demand curve moves up and to the right

A

Discretionary income increase (income increase, lower taxes, lower savings rate)

19
Q

Demand curve moves down and to the left

A

Discretionary income decrease (decrease income, higher taxes, and higher savings rate)

20
Q

Supply curve moves down and to the right

A

Production improves (firms produce more goods at lower cost)

21
Q

Supply curve moves up and to the left

A

Increase in production costs (firms produce less at a higher cost)

22
Q

Four monetary policy tools

A

1) reserve requirement
2) discount rate
3) open market operations
4) excess reserve rate

23
Q

Open market operations

A

Buying / selling government securities

  • buying: increase money supply / decrease interest rates
  • selling: decrease money supply / increase interest rates
24
Q

Current ratio

A
  • ability to meet short-term obligations

Current assets / current liabilities

25
Q

Housing ratio

A

Monthly housing (PITI) / Monthly gross income

Target < or = 28%

26
Q

Housing + other debt ratio

A

Monthly housing (PITI) + all other recurring debt / monthly gross income

Target of < or = 36%

27
Q

How ARM works

A

2/6 ARM

  • interest rate can’t increase more than 2% per year or 6% for term
28
Q

PAYE

A

Monthly payment 10% of discretionary income w/ forgiveness after 20 years

29
Q

IBR

A

Monthly payment of 15% of discretionary income w/ forgiveness after 25 years

30
Q

ICR

A

20% discretionary income w/ forgiveness after 25 years

31
Q

Lifetime Learning Tax Credit

A

20% of up to $10,000 in qualified expenses

  • max credit per family is $2K per year
32
Q

American Opportunity Tax Credit

A

1st four years of college

  • 100% of the first $2K in qualified expenses
  • 25% of second $2K in qualified expenses
  • Max credit of $2,500 per year / student

Certified Financial Planner Exam 2021 (6 decks)

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