GP - V2 Flashcards
PITI
Principal, Interest, Taxes, Insurance (Home Owners)
Consumer Credit Report Act
Interest Must be Reported as (APR)
Credit Terms must be disclosed Points Prepayment Penalties
Lost or stolen credit cards limited liability $50 Per Card
Kiddie Tax
On the first $1,250 (No Tax Applied)
Next $1,250 Tax @ 10%
After $2,500 Taxed at Parent’s Marginal Tax Rate
Fee Based
Indicated the planner or planning firm are compensated through both commission and fees
Requirements for Chapter 7
Average monthly net income for 60 Months less than $6,000
Between $6,000 and $10,000 for the last 60 Months (Net Income Must be less than 25% of all non-priority unsecured debts) (Priority Debt Taxes, Alimony, Child Support, and Criminal Fines)
According to CFP Board, how often should a client’s financial plan be monitored?
The CFP Board specifies nothing. As deemed appropriate by the client and advisor
Seven Steps of the Planning Process
Gathering Information, Identify and Select Goals, Analyze current course of action and alternatives, Developing Recommendations Presenting Recommendations, Implementing Recommendations, Monitoring Recocommendations
Code of Conduct Catch-All
Act in a manner that reflects positively on the financial planning profession and the CFP certification
SEC Regulation S-P
Financial Institutions must provide customers with a notice of privacy policies and practices and must not disclose non-public personal information
Fee-Based and Fee-Only
Not Interchangeable. Fee-Based compensated through fees and commission. Fee-Only is not compensated on sales including annuities and insurance.
Exception to Borrowing money from a client?
When the client regularly engages in the business of lending money
CFP Board (DEC)
Disciplinary and Ethics Commission is responsible to take appropriate action
regarding alleged violations of code of ethics and practice standards
Trust Companies
An organization usually associated with a commercial bank, which is engaged as a trustee fiduciary, or agent for individuals and organizations
CFP Code of Conduct
October 19, 2019 Revised
Act with honesty, integrity, competence, and diligence
Act in the client’s best interests
Exercise due care
Avoid or disclose or manage conflicts of interest
Maintain confidentiality and protect the privacy of client information
Act in a manner that reflects positively on the financial planning profession and CFP certification
Duties Owed to Clients
Fiduciary Standard, Duty of Loyolaty, Duty of Care, Duty to Follow Client Instructions, The Integrity Standard, The Competence Standard, The Diligence Standard, Standard to disclose and manage conflicts of interest. Sound and Objective Professional Judgement Standard, The Professionalism Standard, Standard to Comply with the Law, Confidentiality Privacy Standard.
Money Scripts
Money avoidance, Money worship, money vigilance, Money status
Which is the leading indicator of inflation trends PPI or CPI?
PPI as producer prices increase they are passed along to the consumer
Reverse Mortgage
1.) Proceeds are tax-free can be used for any purpose
2.) The repayment amount cannot exceed the value of the home regardless of loan balance
3.) Once the loan is repaid, any remaining equity is distributed to the borrower’s estate
4.) The home does not need to be owned free and clear to qualify for reverse mortgage
Investments Adviser (ABCs)
A person who provides Advice or a issues a report or analysis regarding securities
A person who is in the Business of providing such services
A person provides such services as Compensation
Execeptions (BLAT)
A Bank or holding company
A Lawyer, Accountant, Engineer, or Teacher
Filing with SEC
1.) Files an ADV for with the SEC
2.) Filing fee $150
3.) Submits ADV Part I and Schedule I updates annually
ADV-W
Form filed to cease operations
Can RIA initials be used in business card?
No, it must be fully written out (Registered Investment Advisor)
FINRA Registration
1.) Associates with Broker Dealer
2.) Registers with FINRA through a B/D on form U-4
3.) Passes appropriate exams
4.) Central Registration Depositary (CRD) system makes registration uniform across states
Express Authority
Written explicit direction from the principal
Implied Authority
That which the public believes the individual has and is based on such indicators as signage, rate, and books. Implied authority is the actual authority that the agent has to carry out the principal’s business in accordance with the general business practices
Apparent Authority
Arises out of the negligence of the principal allowing the agent to appear to have authority bc of certain past actions
Conditional Receipt
Temporary contract obliging a life insurance company to provide coverage as long as the premium accompanies an acceptable application. Pays death benefit if insured dies and application WOULD have been approved.
Investment Advisors Act (IAA) of 1940
Regulates Investment Advisors and their activities under the Investment Advisors Act (IAA) of 9140
Regulatory Requirements for RIAs?
Less than $100mm under management currently registers with their state of office (not home) domicile. If no provisions for registration in the state advisors can register with SEC. Advisors may need to register in multiple states.
Chapter 7 filers must satisfy a “means test”
Average monthly income for 60 months > $10,000 NOT and Option
Average monthly income for 60 month < $6,000 is an OPTION
Average monthly income is between $6,000 and $10,000 debtor can file Chapter 7 if net monthly income is <25% of all non-priority unsecured debts. $32,000 Credit Card balance (25% $8,000) average monthly income $7,000 - Qualifies for Chapter 7
Chapter 13
Reorganization - Payments to creditors are typically reduced and more manageable, creditors cannot harass, debtors are generally not required to relinquish assets
Chapter 11
Generally, for individuals who do not qualify under Chapter 13 because they exceed debt limitations
Money Illusion/Price illusion
A tendency in which people tend to view their wealth in nominal terms rather than real terms
Can a loss be taken on a personal residence?
Losses on a personal residence are not allowed
Does GDP Include Inflation?
No
Must a financial planing agreement be written?
Yes
When must written documents be provided?
When Financial Planning is part of the financial advice (EXCEPT PRIVACY ALWAYS WRITTEN)
If Financial Planning is part of the Financial Advice what documents must be written?
Privacy Policy, Services and Products, How the Client Pays, How you firm and related parties compensated, Public Discipline and Bankruptcy, Referral Compensation, Terms of Engagement, Other Material Information
Does turnkey management or fees related to soliciting clients count as “fee based”?
No the CFP Board does not deem as sales related
Are soft dollar arrangements considered “fee based”?
No
