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Intro to FP > Intro to FP > Flashcards

Intro to FP Flashcards

1
Q

Code and Standards

A

Provide specific planning information that must be included and considered in the dev of a modular (limited in scope) FP or comprehensive FP

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2
Q

Code of Ethics

A

ethical principles that guide CFP behavior & set forth 6 directives

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3
Q

Standard of Conduct

A

duties CFP owes to clients, firms, subordinates, CFP board

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4
Q

Practice Standards for the FP Process

A

7 step process - advance professionalism and enhance value

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5
Q

CFP Procedural Rules enforce what

A

Enforce the CODE of ethics, STANDARDS of conduct, and PRACTICE standards.

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6
Q

4 E’s

A

Education
Examination
Experience
Ethics

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7
Q

3 Duties

A

Duty of Loyalty, Duty of Care, Duty to Follow Client instructions

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8
Q

Using CFP

A

Certification marks are trademarks
CFP is always capitalized and the r is preferred but tm is acceptable
CERTIFIED FINANCIAL PLANNER always has tm

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9
Q

CFP Approved nouns

A

certificant
certification
professional
practitioner
mark

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10
Q

4 Es Education

A

bachelors or higher - acquire knowledge to deliver professional, competent and ethical planning services

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11
Q

4 Es Examination

A

assess ability to apply planning knowledge in an integrated format to financial planning solutions

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12
Q

4 Es Experience

A

3 years of exp in planning
OR 2 yrs personal delivery experience that meets addtl requirements

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13
Q

4 Es Ethics

A

adhere to standards outlined in Code of Standards and acknowledge cfp board right to enforce

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14
Q

Financial Planning as defined by CFP Board

A

A COLLABORATIVE 🤝 process that helps MAXIMIZE ⬆️ a clients POTENTIAL for meeting LIFE GOALS 👶 through financial advice that integrates relevant elements of the clients, personal and financial circumstances.

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15
Q

Are there a minimum number of a clients “relevant elements” to be considered in a plan?

A

No. A financial plan may exist even when only one relevant element is involved

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16
Q

Development of a FP involves

A

analyzing, evaluating and integrating, current and future financial assets, liabilities and resources, incorporating personal client information adhering to client goals and applying economic projections to the recommendations

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17
Q

What if you lack competency?

A

Obtain comptence, obtain assistance, limit or terminate engagement or refer to a competent professional

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18
Q

Does Financial Planning require Financial Advice?

A

Yes, you provide planning through financial advice.

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19
Q

Does financial advice require planning?

A

No.

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20
Q

If you provide financial advice to a client what duty applies?

A

Fiduciary Duty

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21
Q

When do practice standards apply?

A

-if the advice provided REQUIRES PLANNING 📄 &
-the client agrees to engage 🤝

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22
Q

What is NOT advice

A
  1. A communication that would not be viewed as a recommendation
  2. Responses to direct orders
  3. Marketing materials, general education materials
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23
Q

When do you define the scope of the engagement?

A

⏰Prior to providing any financial advice

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24
Q

Who defines the scope of the engagement?

A

The practitioner and client mutually

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25
Q

5 Integration factors
(what do you need to make a plan)

A
  1. # of RELEVANT ELEMENTS 👩‍🔬
  2. Portion & Amt of ASSETS 💶
  3. Length of time ⏰
  4. Exposure to risk 😬
  5. Barriers to implementing advice
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26
Q

NOT relevant elements of planning

A
  1. Opening an account or completing an application 📝
  2. Fact finding for regulatory requirements like KYC 👨‍💼
  3. Solely providing brokerage 📈or insurance products/services
  4. Acting as Mortgage Broker 🏡
  5. Teaching a financial class or continuing ed 👩‍🏫
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27
Q

Engagement Letter

A

provided to client to establish the contractual relationship

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28
Q

Included in Engagement Letter

A
  1. Terms of engagement client/CFP/firm
  2. Scope of engagement & any limitations
  3. Period during which service provided
  4. Clients responsibilities
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29
Q

Docs that may contain engagement information

A

Form ADV pt2A items 10,12,14
Bank 🏦 trust agrmt & related docs
Brokerage agrmt 📈

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30
Q

Responsible for implementing, monitoring, & updating plan unless

A

It is specifically excluded from the scope of engagement

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31
Q

Fiduciary Duty

A

must act as fiduciary at all times when providing advice - disclose Con of Int.

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32
Q

Integrity

A

services must be performed w/integrity, honesty, candor - can’t make untrue statements or attempt to defraud

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33
Q

Competence

A

competent services with relevant knowledge and skill - if lacking - gain, acquire, refer, terminate

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34
Q

Diligence

A

services must be performed in a timely ⏰and thorough manner

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35
Q

Disclose and Manage Conflicts of Int.

A

Fully disclose all CoI that could affect relationship - adopt and follow practices that prevent CoI

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36
Q

Sound and Objective Professional Judgement (can’t accept what)

A

must exercise professional judgement and NOT SOLICIT or ACCEPT GIFT or NON CASH COMP. that would compromise objectivity

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37
Q

Professionalism means treating others how

A

with dignity, courtesy, and respect

38
Q

Comply with the Law

A

laws rules and regulations governing Professional Services

39
Q

Confidentiality and Privacy

A

not disclose any NPCI, NPCI must be protected

40
Q

Code of Ethics

A

-honesty, integrity, competence, diligence
- act in client best interest
- exercise due care
- avoid or disclose CoI
- Maintain confidentiality
- Act manner that reflects positively on CFP

41
Q

Provide info to Client

A

what info provided to client when providing advice and planning

42
Q

Duties when Communicating

A

Accurate and easily understood info

43
Q

Duty when Representing Compensation

A

never provide false or misleading info - must clearly explain FEE-BASED, FEE-ONLY, and SALES RELATED comp.

44
Q

Duty when working/recommending/engaging with other person

A

have reasonable basis for recommending, disclose any comp arrangement, communicate w/other professional on behalf of client

45
Q

Duty when selecting/using Tech

A

reasonable care must be used

46
Q

Refrain from borrowing/commingling assets

A

may not borrow from or lend money to client unless certain exceptions apply

47
Q

Reasonable care when Supervising

A

when supervising persons acting under your direction 👨‍💼, employees, prevent violations of laws, rules, regs

48
Q

Comply with Lawful objectives of Firm

A

subject to discipline from CFP board for violations of your firm, not if firm rules conflict with CFP standards

49
Q

Provide Notice of Public Disclipline

A

must advise your firm in writing of discipline by CFP board

50
Q

Refrain from Adverse Conduct

A

not engage in activity that reflects adversely on your integrity or fitness as CFP professional

51
Q

Reporting

A

provide written notice to board within 30 days of after certain conduct occurs

52
Q

Provide Narrative Statement

A

narrative statement that describes reportable event

53
Q

Cooperation

A

not make false or misleading statements to CFP board

54
Q

LIIVES (financial problems)

A
  1. Lack of liquidity
  2. Inadequate resources
  3. Inflation
  4. Value
  5. Excessive Taxes
  6. Special needs and other issues
55
Q

Lack of liquidity

A

inability to quickly turn invested capital into spendable cash w/o incurring unreasonable cost

56
Q

Inadequate resources

A

insufficient capital or income in the event of death, disability, college, special needs

57
Q

Improper disposition of assets

A

leaving wrong asset to wrong person at wrong time in the wrong manner

58
Q

value

A

stabilize and maximize the financial security of value of the client’s business or other assets

59
Q

excessive taxes

A

add to the cost of an investment and slow the progress toward objectives

60
Q

special needs or other issues

A

desire beyond quantifiable goals

61
Q

counting on inheritance is a bad idea why

A

parents are living much longer so won’t receive $ until later

62
Q

3 general options if you can’t meet goals

A
  1. refuce lifestyle currenty and/or during retirement
  2. modify investment strategy to yield higher return
  3. retire later
63
Q

Financial Planning Report Should Cover

A
  1. Analysis: where are you now
  2. Objectives: where you want to be
  3. Strategy: how to get there
64
Q

When presenting - liberal use of

A

graphs and checklists

65
Q

Standard of living objective analyzes what and recommends what ratio?

A

analyze required spending - food and housing costs & discretionary
NO MORE THAN 80% OF GROSS INCOME

66
Q

Savings Objective recommends how many months of savings?

A

recommend at least 3 months of of expenses

67
Q

Protection objective

A

life, health, disability, property and liability insurance

68
Q

Accumulation objective (investment)

A

-future buildup of capital for diverse needs
-difficult to define and set priorities
-variety of needs and long timeframe

69
Q

Financial independence (retirement) objective

A

-should break down into subgoals
-typically most important accumulation objective
-may have financial independence and still work enjoyable occupation

70
Q

Estate planning objective

A

-preservation and distribution of wealth after death
-having a will most fundamental part
-avoidance or minimize estate tax
- trusts, gifts, proper titling of assets

71
Q

Duties to client when providing financial advice

A

-Fiduciary Duty
- Disclose & Manage Conflict of Interest
- Provide information to a client
- Working with other persons

72
Q

Duties owed to clients

A
  • Integrity
  • Competence
  • Diligence
  • Sound & Objective Judgment
  • Porfessionalism
  • Comply with the law
  • Confidentiality and privacy
  • When communicating
  • representing Comp
  • technology
  • borrowing or loaning money
73
Q

Payment method that does not need to be disclosed?

A

Soft dollars

74
Q

Do you have to come up with new courses of action for the client?

A

No the recommendation may be to continue the current course of action

75
Q

Not comingling funds would fall under what ethical principle?

A

Integrity

76
Q

EGADIM

A

-Establish and define relationship
-Gathering client data
-Analyze and evaluate client financial status
-Developing and presenting recommendations
-Implementing the recommendations
-Monitoring

77
Q

Establish the client relationship
IDDDEP

A

Identify services to be provided
Disclose conflicts of interest
Disclose Compensation
Determine client and cfp responsibilities
Establish duration of engagement
Provide info to define or limit scope

78
Q

Digence has to do with what

A

being timely and thorough

79
Q

Sound and objective judgement has to do with what

A

not accepting gifts or non cash compensation

80
Q

When could you potentially disclose NPPI?

A

With clients consent for ordinary business purposes

81
Q

Say you have client consent to disclose NPPI, who could you potentially disclose to?

A

-your firm
-clients attorney, accountant, auditor
-someone acting in representative capacity for the client

82
Q

Besides ordinary business purposes when when else might you disclose NPPI

A

-to law enforcement
-to comply with federal state or local law
-to defend against allegations of wrongdoing made by govt
-civil suit
-to CFP board
-compliance organizations

83
Q

What is the language you need to undetake to protect client NPPI

A

“take reasonable steps” to protect NPPI

84
Q

When do you provide notice about NPPI

A

at the time of engagement and annually

85
Q

What regulation under fed securities law deals with NPPI

A

reg S-P

86
Q

What can you NOT do regarding compensation

A

Make false or misleading comments

87
Q

Fee only means

A

-you and your firm receive NO sales related comp
-related parties receive NO sales related comp

88
Q

Fee based means

A

“fee and comission”
means you receive fee and sales related comp
-have to clearly state you are not fee only and that you receive fees and comissions

89
Q

Sales related compensation

A

any bonus or portion of compensation resulting from a client PURCHASING or SELLING financial assets, from clients holding assets, or FROM REFERRALS

90
Q

Sales related comp does not include

A

-SOFT DOLLARS
-fees for CUSTODIAL or ADMIN services
-NON-MONETARY provided by another service provider
-fees for PROFESSIONAL SERVICES other than solicitations and referrals
-fee a RELATED PARTY receives

Intro to FP (14 decks)

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