General Principles CFP

Understanding The Client's Personal and Financial Circumstances

Step 1; obtain quat/qual information, analyze information, address incomplete information

Identify and select goals

Step 2; Help client select/prioritize goals

Analyze current course of action and potential alternatives

Step 3

Develop financial planning recommendations

Step 4; consider assumptions, basis, timing/priority, whether independent or with other recs

Presenting the financial planning recommendations

Step 5; present recs and info required to be considered when developing

Implementing the Financial planning recommendations

Step 6; address responsibilities, identify/analyze/select products/services and implement

Monitoring progress and updating

Step 7; establish monitoring responsibilities, update goals

Unacceptable Conduct

Cannot petition DEC; revocation of financial license, violent crime within last 5 years

Conduct presumed unacceptable

May petition DEC; Two or more bankruptcies, revocation of non-financial license, suspension of financial license

CFP Board Counsel

Has authority to investigate and issue a complaint against the respondent for violations against the code of ethics and standards of conduct

Disciplinary and Ethics Committee (DEC)

CFPs and members of public; has authority to issue a final order and impose discipline

Hearing Panel

Conducts hearing and is at least 3 people; most must be CFPs, majority must be DEC; DEC member must be chair

Length of time to acknowledge CFP board investigation

14 days

Length of time to decide between settlement and hearing review+fee

30 days

Length of time before review date to submit documents and statements

60 days

Notice of hearing from CFP board counsel before hearing

30 days

Length of time to file appeal after DEC order

30 days

Private Censure

Unpublished written reproach mailed by DEC to CFP

Public Letter of Admonition

Written reproach of the CFP's behavior in press release

Suspension

Minimum 90 days; max 5 years

Recession

Two consecutive periods of negative GDP growth

GDP formula

consumer spending + gov & industrial investment + government spending + Net exports

Price elasticity

Sensitivity of quantity demanded in response to Price

Fed’s 3 tools:

Discount rate; reserve requirement; open market activities

Discount rate

Rate at which member banks borrow from the government

Reserve Requirement

Percentage of deposits that must be held on reserve

Open market activities

Fed buys and sells securities in the open market— SELLS to CONTRACT (decrease money supply)

Valuation of business assets on balance sheet

lower of cost or FMV

Current Ratio

Current assets / current liabilites

Quick Ratio

Current assets - inventories / current liabilities

Working capital

Current assets - current liabilities

Debt to Equity

Total Long term debt / equity

Times interest earned

EBIT / interest expense

Debt ratio

Debt / assets

Emergency Fund Ratio

Monetary assets / Monthly living expenses

Target emergency fund ratio

3 - 6 months living expenses

Acceptable emergency fund investments

Cash value life insurance, lines of credit, HELOCs