1. Partnership 2. Evocation 3. Acceptance 4.Compassion
1.Understanding the clients personal and financial cirumstances
2.Identifying and Selecting Goals
3.Analyzing current course and alternative courses of action
4.Develping the planning recommendations
5.Presenting the planning recommendations
6. Implementing the plan
7. Monitoring and updating the plan
1. Investors are normal-not rational
2.Markets are not efficient
3.The behavioral porfolio theory governs
4.Risk alone does not determine returns
A state of being wherein a person can fully meet current and ongoing financial obligations and can feel secure in their financial future and is able to make choices that allow them to enjoy life.
Competence + Relatedness + Autonomy = Intrinsic motivation
1. Accumulation 2. Conservation 3. Gifting
cash & cash equivalents
______________________. = 3-6 months
Monthly Non-Discretionary Cash Flows
Cash & Cash Equivalents
_________________________ >= 1
Current Liabilities
Housing Costs (monthly)
_______________________ <=28%
Monthly gross pay
Housing Costs + Other Debt Payments (monthly)
___________________________________ <=36%
Gross Pay (monthly)
Total Debt
_________ = Depends on Age
Total Assets
Net Worth
___________ = Depends on the Age of Client
Total Assets
Savings + Employer Match
_______________________ >= Depends on age but 10-15%.
Gross Pay
Cover the risk, save, and invest
Life = 12-16 times Gross pay
Disability = 60-70% Gross pay
Savings = 10-13% of Gross pay
1. Assets
2. Liabilities
3. Net Worth
(All stated as a moment in time)-snapshot
Assets - Liabilities = Net Worth
1+Rn (investment rate of return)
___________________________ -1 * 100
1+i
1. Prepaid tuition
2. 529 plans
3. Coverdell ESA
4.U.S. Governement Series EE and I Bonds
1. AOTC (American Opportunity Tax Credit)
2. Lifetime Learning Credit
100% of first 2,000 and 25% of next 2000. Per student basis.
Per family basis. 20% of first 10,000 (max of 2k)
UTMA or UGMA Accounts
2500 or more in income from a UGMA or UTMA account. Taxed at parents bracket at that point.
An ESA account owned by a third party, a 529 owned by a 3rd party, or a UGMA/UTMA account which is an asset of the child.
The output of all citizens of a country
The output of all citizens and foreigners in a country.
Price of good today-price of a good a year ago
________________________________________
Price a year ago
Inflation that is still going up but has slowed.
A decrease in the overall price level of goods and services.
1. Expansion 2. Peak 3. Recession/contraction 4. Trough
Where the economy is headed-ex. Building permits
They confirm our beleif of what was actually happening
1. Maintain Price levels
2. Maintain long-term economic growth
3. Maintain full employment
1. Reserve Requirement
2.Discount rate/Fed Funds rate
3.Open Market Opperations (buying or selling treasuries)
4.Excess Reserve deposits
Increase causes rates to fall while a decrease causes rates to go up.
The reserve requirement increases causing money supply to decrease and interest rates to increase.
Decrease the reserve requirement which causes money supply to increase and interest rates to decrease.
Discount rate is the rate at which banks can borrow from the fed and the federal funds rate is the rate that member banks borrow from each other.
1. Maintain price levels
2. Maintain long-term economic growth
3. Maintain full employment
1. Taxes
2. Spending
3. Defecit Management
Price
More or less money in consumers pockets.
Small change in price results in a larger percentage change in the quantity demanded. Considered elastic if elasticity is greater than 1.
A small percentage change in price results in a small percentage change in the quanitity demanded. Less than one is considered ineleastic.
Supply
Equilibrium
Qulified plans
Some personal property (tv or car)
Education funds
Traditional and Roth IRA's up to an amount
Rollover IRA's entirely
3 years of back taxes
child support or alimony
debts obtained by fraud
most student loans
Property leins
Insures up to 250,000 per depositor, per legal account ownership, per financial institution.
When a broker dealer becomes insolvent will return cash and securities up to 500,000. The 500k limit includes cash of up to 250k.
Workers comp is not taxable but unemployment benefits are.
1. Act with honesty, integrity, competance (CE-30 hours per every 2 years 2 of which must be ethics), and diligence.
2. Act in the clients best interests.
3. Exercise due care.
4. Avoid or disclose and manage conflicts of interest
5. Maintain the confidentiality and protect the privacy of client information
6. Act in a manner that reflects positively on the financial planning profession and CFP certification
1. Duties owed to clients
2. Financial planning and application of the Practice standars for the financial planning process
3. Practice standards for the financial planning process
4. Duties owed to firms and subordinates
5. Duties owed to the CFP board
6. Prohibition on circumvention.
Financial Advice
Financial Advice.
1. Disclose the conflict
2. Obtain the clients informed consent
3. Manage the conflict in the clients favor
For ordinary business purposes or for legal and enforcement purposes.
Must provide a written notice of those policies both a the time of engagement and not less than annually.
The terms of engagement
1. They are a member of your family
2. They are in the business or a business that lends money
Financial Planning Definition
1. Private
2.Public Admonition
3. Suspension
4. Revokation
Within 30 calendar days
Felony conviction for theft, embezzlement or other financially-based crimes
Felony conviction for tax fraud or other tax related crimes
Revocation of a financial professional license, unless revocation was administrative in nature
Felony conviction for any degree of murder or rape
Felony conviction for any other violent crime within the last 5 years.
1. 2 or more personal or busines bankruptcies.
2. Revocation or suspension of a non-financial professional license, unless admin in nature.
3. Suspension of a financial professional license unless admin in nature
4. Felony conviction for non violent crimes, inlucing perjury within the last 5 years
5. Felony conviction for violent crimes (other than muruder or rape) that occurred more than 5 years ago.
Preserving the government benefits for the child or dependent-no money in their name.
Account established for the benefit of persons with disabilities.