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45 Cards in this Set
- Front
- Back
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Financial planning definition |
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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Always barred |
Felony financial or tax crime convictions Revocation of financial professional license Rape/ murder Felony conviction for other violent crime in past 5 years |
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Presumed unacceptable |
2 or more bankruptcy’s Revocation of professional non financial license Suspension of financial license Felony- non violent in past 5 years Violent crime felonies other then rape and murder
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Exceptions to SEC registration |
Teachers, Accountants, Brokers, Lawyers, Engineers (TABLE) |
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Exemptions from registration |
Venture capital Insurance companies Private funds less then 150m Home state Foreign advisors Securities not on a national exchange |
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Risk panel |
Life insurance 10-16x gross pay Health insurance Disability 60-70% gross pay Property- home and auto LTC- 36-60 months PLUP- $1-3 million |
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Short term |
Emergency fund 3-6 months Housing ratios 28-36 28% PITI/ monthly gross income 36% PITI + recurring debt ratios/ monthly gross income |
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Short term |
Emergency fund 3-6 months Housing ratios 28-36 28% PITI/ monthly gross income 36% PITI + recurring debt ratios/ monthly gross income Debt analysis Good- Bad- Reasonable |
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Short term |
Emergency fund 3-6 months Housing ratios 28-36 28% PITI/ monthly gross income 36% PITI + recurring debt ratios/ monthly gross income Debt analysis Good- Bad- Reasonable |
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Education funding |
3k, 6k, 9k Per child per year |
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Short term |
Emergency fund 3-6 months Housing ratios 28-36 28% PITI/ monthly gross income 36% PITI + recurring debt ratios/ monthly gross income Debt analysis Good- Bad- Reasonable |
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Education funding |
3k, 6k, 9k Per child per year |
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Retirement |
Amount 16x pre retirement income Savings rate- 10-12% Return 8-10% expected Risk/std 8-14% |
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Legacy |
Will Durable POA for healthcare Advanced medical directive |
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Recession vs. Depression |
Recession- 6 months, 2 quarters Depression- 18 months, 6 quarters |
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Debt not discharged through chapter 7 |
Students and government loans 3 years back taxes Alimony and child support Monies owed for malicious acts |
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Debt ratios |
Consumer debt payments LESS then 20% of NET income Housing debt- less then 28% of GROSS income Housing plus all other recurring debt- less then 36% of GROSS income |
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Calculating a mortgage with points |
Point= 1% of loan balance |
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Insurance risk |
Not Catastrophic Homogeneous exposure Accidental measurable and Determinable
CHaD |
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Legal contract requirement |
Competent parties Acceptance Legal considerations Lawful purpose |
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Six steps of risk management |
Determine objectives of risk mgt program Identify risky to which client is exposed Evaluate risks-probability and potential cost Determine alternatives and select most appropriate Implement the program Evaluate monitor and control |
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Whole life insurance dividend options |
Cash option Reduce premiums Accumulate at interest Paid- up additions Term- add term insurance each year |
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Insurance non forfeiture options |
Cash surrender value Reduced paid up insurance Extended term insurance |
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Medicare does NOT cover |
Dental care/ dentures Cosmetic surgery Hearing aids Eye exams |
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Systematic risks |
Purchasing power Reinvestment rate Interest rate Market Exchange rate |
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Unsystematic Risks |
Accounting Business Country Default Executive Financial Governmental/ regulatory |
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Arbitrage pricing theory key points |
Multi factor model Sensitivity to factors Beta and STD are NOT inputs Attempts to take advantage of price imbalances |
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Dividend payout ratio |
Common stock dividend/ earnings per share |
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Dividend payout ratio |
Common stock dividend/ earnings per share |
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Return on equity |
Earnings per share/ stockholders equity per share |
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Discount rate cafes funds rate |
Discount- banks to borrow from the FED Federal funds- rate banks borrow from eachother |
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Types of mini bonds |
General obligation- backed by taxing authority Revenue Private activity |
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Convertible bonds |
Conversion value= par/ conversion price X stock price |
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Orion pricing models |
Black Scholes- current price, time to expiration, risk free rate of return, volatility of underlying asset Put/Call parity- value put based on call Binomial pricing model- underlying asset moving in 2 directions |
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MACRS classes/ timeframes |
3 yr- tractors, rent to own property 5yr- Autos, computers, office equipment 7 yr- office furniture and fixtures 27.5 yr- rental home 39 yr- office building |
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Corporation dividend received deduction- corporations- by ownership % |
0-20%—- 50% 20-80%—- 65% 80-100%—- 100% |
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S corp requirements |
Less then 100 employees US citizen/ resident owners Must be eligible corporation under US and State law Insurance, domestic international sales and certain financial companies NOT eligible Only 1 class of stock |
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Qualified long term care requirements |
No surrender value Qualified LTC services only Dividends only for premium la and extra benefits Meet consumer protection laws Does not cover expenses covered under Medicare |
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HO section 1 and 2 coverages |
1: A- dwelling B- other structures C- personal property D- loss of use 2: E- personal liability F- medical payments to others |
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HO section 1 and 2 coverages |
1: A- dwelling B- other structures C- personal property D- loss of use 2: E- personal liability F- medical payments to others |
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Exclusions from open perils policy HO |
Neglect (termites) Flood Earthquakes/landslide War or nuclear Power failure Intentional act |
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Dividend payout ratio |
Common stock dividend/ earnings per share |
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Return on equity |
Earnings per share/ stockholder equity per share |
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After tax yield |
Corporate rate * (1- marginal tax rate) |
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Bond price change |
Duration * (interest rate change/(1 + YTM)) |
