What is considered an Investment Advisor (IAA)?
Advice, Business, Compensation
All three parts need to be met
What is Step 1 of the Financial Plan process?
Understand
- Deliver ADV Form
- Clients’ expectations and Needs (Gather Data, Values and Needs)
- Discuss the process
- Scope of Services
- Identify and resolve conflicts of interest
- Discuss responsibilities
- Scope of engagement
- Disclosures
What is Step 2 of the Financial Plan process?
- Identify mutually agreeable Goals
- prioritize goals
- quantify goals
- Educate
What is Step 3 of the Financial Plan process?
Analyze
- Strengths and weaknesses of the current plan
- Financial status
- Risk management and Insurance
- Benefits
- Investments
- Taxes
- Retirement
- Estate planning
- Business ownership
- Education
- Other considerations
What is Step 4 of the Financial Plan process?
Develope
- Synthesize conclusions
- Consider alternatives
- Consult other professionals if needed
- Develop Recs
- Document Recs
What is Step 5 of the Financial Plan process?
- Present Financial Plan
- Obtain feedback
- Provide documentation
- Verify Client Acceptance
What is Step 6 of the Financial Plan process?
Implement
- create proritized implementation
- Assign responsibilities
- Support them
- Coordinate with other professionals
- Define monitoring responsibilities
What is Step 7 of the Financial Plan process?
Monitoring
- Discuss and evaluate changes
- Review performance
- Review and Evaluate Changes
- Make new Recs
- Review the scope of work
- Provide client ongoing support
Duty of Loyalty
CFP professional is req’d
- hold interests of the client above those of the planner and firm
- balance conflicts of interest so as to maintain the clienst best interest
Duty of Care
CFP professional is req’d to act w/
- skill
- Prudence
- diligence
of a prudent professional
Disability
Social Security disability benefits
- Worker’s comp -> job-related? Not taxable
- Employer - provided disability insurance
- Medicare or Medicaid benefits
CFP EXAM TIP: make sure what the disablity coverage is in the question and they have coverage for that
Monetary Windfalls - Structured Settlments
- annuity
- tax-free payments instead of a lump sum
- Injury Victims
Monetary Windfalls - Compensatory Damage
COMP - free
- tax-free
- excluding discrimination or non-injry are taxable
- One exception - damages up to the amount of actual medical can aand psychiaratic care are tax-free
FHA Phaseouts
FHA is for lower or middle class
Guaranteed through FHA
Mortgage maximums are between $524,235 to 1,207,500
PITI Misses
- add flood insurance if they break it out on the test
Durable vs Non-durable Goods
Durable - do not wear out quickly
- cars, appliances, electronics etc
- Cyclical
Non-Durable - consumables - short life span
- not affected by recessions
Net Present Value is 0?
- the interest rate is the same as the req’d rate of return
Monetary Windfalls - Punitive Damages
Taxes are punitive
- exception - wrongful death
When can we terminate a client relationship?
- Under the CFP Board Code of Ethics, the scope of the client relationship must be mutually acceptable to both client and planner. When it is no longer so either party can terminate the relationship.
F.I.T.T. Memory Hack (CFP Exam - Professional Conduct/Planning Process)
- F: Facts First (Gather all material facts; don’t guess).
- I: Identify the Conflict/Issue (Disclose and manage, don’t ignore).
- T: Talk/Educate (Explain consequences of risky requests).
- T: Trust the Process (Follow the Financial Planning Process—don’t skip stages).
Rule of Thumb: The CFP exam rewards the “process-oriented” professional. If in doubt, gather info or educate.
TIME (Mental Reset for Exam Day)
- T — Trust the Process: Lean on practiced keystrokes and formulas; don’t second-guess your technical training.
- I — Ignore the Distractors: Cross out irrelevant data (like lottery windfalls or monetary policy distractors) immediately.
- M — Manage the Clock: Don’t get stuck on rounding. If you’re close, pick the “closest neighbor” and move on.
- E — Evaluate the Intent: Read the last sentence of the prompt first to identify the core rule being tested.
