Tune Up Notes

Question 1

SECURE Act Highlights

Answer 1

• IRA contributions allowed beyond 70.5
• RMDs begin 72
  -non-spouse IRA bene subject to 10 year rule
• 529 use up to 10k for student loans

Question 2

Code of Ethics

6 Items

Answer 2

1. Honesty, integrity, competence, diligence
2. Client’s best interest
3. Due care
   4.Avoid/disclose conflicts of interest
4. Confidentiality and privacy
5. Reflect positively on CFP

Happy
Cats
Dance
At
Canada’s
Regala

Question 3

Financial Planning Process

7 Items

Answer 3

1. Understand circumstances
2. Identify/select goals
3. Analyze situation
4. Develop recommendation
5. Present recommendations
6. Implement recommendations
7. Monitor the plan

Umbrellas
In
A
Downpour
Prevent
Immense
Mess

Question 4

Practice Standards

Answer 4

CFP must comply when providing:
- Financial Planning; or
- Financial Advice that requires integration of relevant elements; or
- The Client believes Financial Planning has been or will be provided

Question 5

Financial Planning/Financial Planning Process

Answer 5

• collaborative process; helps maximize a Client’s potential for meeting life goals through Financial Advice that integrates relevant elements
• when the Financial Advice provided requires integration of relevant elements of the client’s personal & financial circumstances to act in the client’s best interests, taking into account the integration factors

Question 6

Financial Advice

Answer 6

• A communication that would reasonably be viewed as a recommendation
• a greater chance that Financial Advice is being given whenever the more customized a planner’s communications are to a client
• includes recommendations regarding persons to provide professional services and the exercise of discretionary authority

Fiduciary Duty applies when Financial Advice is provided. This includes:
- Duty of Loyalty
- Duty of Care
- Duty to Follow Client Instructions

Question 7

NPV and IRR

Answer 7

IRR - END mode

Question 8

Education & Retirement Savings

Answer 8

Step 1: calculate FV of annual cost in year 1 of goal (retirement or college)
- END mode
- I/Y = inflation

Step 2: calculate total cost of goal in year 1 of goal
- BGN mode
- I/Y = inflation adjusted ROR

Step 3: calculate savings needed to meet total cost in year 1 goal
- END mode
- I/Y = ROR (level payment)
or
- I/Y = inflation adjusted ROR (serial payment). Note: resulting payment is the beginning of year 1 savings - inflate this value to get EOY payment in 1st savings year

Question 9

Margin Call

Answer 9

At what price will there be a margin call?
Margin Call = [(1 − initial margin percentage) ÷ (1 − maintenance margin)] × purchase price of the stock

At what point will the loan = 65% of position value (example values)?
1. Total value of the position x 65% = $30,000
2. $30,000 ÷ 65% = $46,153
3. $46,153 ÷ 2,000 shares = $23.07

If the price of the securities fall, at what market value will there be a maintenance margin call (example value)?
1. Determine the Market Value of the account: $50,000 (15k debt + 35k equity)
2. $15,000 (debt) ÷ 75% (1-maintenance margin) = $20,000

Margin = “money” ie. equity position

Question 10

Margin Holding Period Return

Answer 10

HPR = (ending value of investment + cash inflows - beginning value of investment - cash outflows) ÷ beginning value of investment

Question 11

Bond Yields

Answer 11

YTC
- PV = purchase price (negative outflow)
- FV = call price
- N = years to call x 2 (semi-annual periods)
- PMT = annual coupon $ - 2 (semi-annual payments)
- I/Y = solve

Question 12

Mortgage Refinance

Answer 12

1. Do a TVM calculation for loan balance, interest rate and term (CPT PMT)
2. Calculate how much balance is left after 5 years
   - 2nd, AMORT, 2nd, CLR WORK, down arrow, payment # to view , ENTER
   if comparing total interest paid on existing mortgage vs. refinance…
3. Calculate how much interest you would have paid for remaining term:
   - payment # to view + 1, ???, last payment #, ???
4. Now do a TVM for new mortgage
5. Calculate how much interest you paid on new mortgage
   - 2nd, AMORT, 2nd, CLR WORK, down arrow, payment # to view , ENTER
6. Subtract new total interest from old total interest

Question 13

IRA Beneficiaries

Answer 13

Eligible Designated Beneficiary:
1. owner’s spouse
2. owner’s kid <18
3. disabled/chronically ill person
4. person less than 10 years younger than owner

Designated Beneficiary:
1. other natural persons

Non-Eligible Beneficiary:
1. non-person

Question 14

Roth IRAs

Answer 14

NOTE: 5 year rule is based on tax year, so could be ~4 actual years (ex. cont. 1 on 4/15/22 meets rule on 1/2/26)