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CFP Certified Financial Planner

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TABLE OF CONTENTS Chapter 1: Introduction............................................................................... 1 Course Conventions and Content .................................................................................. 2 Chapter 2: The Certified Financial Planner Examination ............................ 8 The Beginning of a Great Career ................................................................................... 8 Read the Privacy Policy Notice and the Data Privacy Notice and select “I agree.” .... 16 Chapter 2: Sample Quiz ............................................................................................... 27 Key Takeaways ............................................................................................................. 30 Chapter 3: Certified Financial Planner® Board’s Code of Ethics, Professional Responsibility, and Rules of Conduct .................................... 31 Certified Financial Planner Board’s Financial Planning Practice Standards ............. 34 Certified Financial Planner Board’s Disciplinary Rules and Procedures ................... 36 Financial services regulations and requirements ....................................................... 42 Consumer protection laws ........................................................................................... 46 Fiduciary ...................................................................................................................... 48 Chapter 3: Sample Quiz ............................................................................................... 49 Key Takeaways ............................................................................................................. 52 Chapter 4: General Principles of Financial Planning ................................. 53 Financial statements .................................................................................................... 56 Cash flow management................................................................................................ 58 Financing strategies ..................................................................................................... 60

Economic concepts ...................................................................................................... 62 Time value of money concepts and calculations ......................................................... 64 Client and Planner Attitudes, Values, Biases and Behavioral Finance ....................... 66 Principles of Communication and Counseling ............................................................ 68 Debt management........................................................................................................ 70 Chapter 4: Sample Quiz ............................................................................................... 72 Key Takeaways ............................................................................................................. 75 Chapter 5:Education Planning .................................................................. 77 Education savings vehicles .......................................................................................... 79 Financial aid................................................................................................................. 81 Gift and Income Tax Strategies ................................................................................... 83 Education financing ..................................................................................................... 84 Chapter 5: Sample Quiz ............................................................................................... 86 Key Takeaways ............................................................................................................. 89 Chapter 6: Risk Management and Insurance Planning .............................. 90 Principles of risk and insurance .................................................................................. 91 Analysis and evaluation of risk exposures .................................................................. 93 Health insurance and health care cost management for the individual ..................... 94 Chapter 6: Sample Quiz ............................................................................................. 105 Key Takeaways ........................................................................................................... 108 Chapter 7: Investment Planning .............................................................. 109 Characteristics, uses, and tax implications of investment vehicles ...........................110 Types of investment risk ............................................................................................. 112

Quantitative investment concepts .............................................................................. 114 Measures of investment returns ................................................................................. 115 Asset allocation and portfolio diversification ............................................................ 116 Bond and stock valuation concepts ............................................................................ 117 Portfolio development and analysis ........................................................................... 119 Investment strategies ................................................................................................. 121 Alternative investments ............................................................................................. 122 Chapter 7: Sample Quiz ............................................................................................. 123 Key Takeaways ........................................................................................................... 126 Chapter 8: Tax Planning........................................................................... 127 Fundamental tax law ................................................................................................. 128 Income tax fundamentals and calculations............................................................... 130 Characteristics and income taxation of business entities ......................................... 132 Income taxation of trusts and estates ....................................................................... 134 Alternative minimum tax: AMT ................................................................................ 135 Tax reduction and management techniques ............................................................. 136 ax consequences of property transactions .................................................................137 Passive activity and at risk rules ................................................................................ 139 Tax implications of special circumstances ................................................................ 140 Charitable and philanthropic contributions and deductions. .................................. 142 Chapter 8: Sample Quiz ............................................................................................. 143 Key Takeaways ........................................................................................................... 146 Chapter 9: Retirement Savings and Income Planning............................... 147

Retirement Needs Analysis........................................................................................ 148 Social Security and Medicare .................................................................................... 150 Types of Retirement Plans ......................................................................................... 152 Key Factors Affecting Plan Considerations For Businesses ...................................... 154 Business Succession Planning ....................................................................................155 Chapter 9: Samples Quiz ........................................................................................... 156 Key Takeaways ........................................................................................................... 159 Chapter 10: Estate Planning ..................................................................... 161 Characteristics and Consequences of Property Titling ............................................. 162 Strategies to Transfer Property ................................................................................. 163 Estate Planning Documents ...................................................................................... 164 Gift and Estate Tax Compliance and Tax Calculation............................................... 165 Sources for Estate Liquidity ...................................................................................... 166 Types, Features and Taxation of Trusts .................................................................... 167 Marital Deduction ...................................................................................................... 168 Intra Family and Other Business Transfer Techniques ............................................ 169 Estate Planning for Non-Traditional Relationships .................................................. 171 Chapter 10: Sample Quiz ............................................................................................172 Key Takeaways ............................................................................................................175 Chapter 11: Domain Assessments ............................................................. 176 Establishing and Defining the Client Planner Relationship ...................................... 177 Gathering Information Necessary to Fulfil the Engagement.................................... 178 Analyzing and Evaluating the Client’s Current Financial Status .............................. 179

Developing the Recommendations............................................................................ 180 Communicating the Recommendations ..................................................................... 181 Implementing the Recommendations ....................................................................... 182 Monitoring the Recommendations ........................................................................... 183 Practicing Within Professional and Regulatory Standards ...................................... 184 Chapter 11: Sample Quiz ............................................................................................ 185 Key Takeaways ........................................................................................................... 188 Chapter 12: The Road Ahead ................................................................... 189 You Passed, What’s Next? ......................................................................................... 189 So what next? ............................................................................................................. 192 Chapter 13: Final Exam ........................................................................... 194 Final Exam Quiz......................................................................................................... 195 Conclusion: Thank You! .......................................................................... 216 Follow Along PDF Manual ........................................................................ 217 Important Trademark Note ....................................................................................... 218 Certified Financial Planner Registration and Examination Scheduling Process ..... 219 Education Verification, Postponement and Withdrawal Requests ..........................220 Test Center Regulations............................................................................................. 221 Chapter 2: The Certified Financial Planner Examination ........................................ 222 Chapter 3: Certified Financial Planner® BOARD’S CODE OF ETHICS, PROFESSIONAL RESPONSIBILITY, AND RULES OF CONDUCT ........................ 224 Chapter 4: The Financial Planning Process .............................................................. 227 Chapter 5: Education Planning ................................................................................. 229

Chapter 6: Risk Management and Insurance Planning ............................................ 231 Chapter 7: Investment Planning................................................................................ 235 Chapter 8: Tax Planning ............................................................................................ 238 Chapter 9: Retirement Savings and Income Planning .............................................. 239 Chapter 10: Estate Planning ...................................................................................... 241 Chapter 11: Domain Assessments .............................................................................. 243 Final Exam ................................................................................................................. 244

CHAPTER 1: INTRODUCTION Welcome to this audio course on preparing to become a Certified Financial Planner! I will guide you through the course material. If you are listening to this course and have made the decision to become a Certified Financial Planner, you are likely preparing for the written exam and all other hiring requirements. Maybe you are just contemplating becoming a Certified Financial Planner and want to get some information about the hiring process as well as specifics about the job. Whatever the case, I want to congratulate you on choosing such a potentially rewarding career path. After listening to this course, you will be prepared for the written Certified Financial Planner exam; additionally, you will have a solid understanding of the steps you need to take as you search for and secure a Certified Financial Planner position. Before I get too far into the course, I want to tell you that the Certified Financial Planner designation is a registered trademark. We are neither affiliated with nor endorse the Certified Financial Planner designation. However, please be aware that you cannot just slap a Certified Financial Planner at the end of your name should you become a financial planner. More on that later in the course. A Certified Financial Planner helps individuals, families, organizations, and businesses achieve their financial goals. Services provided by a Certified Financial Planner include creating a budget, managing expenses, investment planning, risk management, tax planning, estate planning, and retirement planning. I will discuss all of these over the course of my lectures. A financial planner provides unbiased advice to people to help them better manage their finances. To successfully fulfill all required duties, a financial planner must possess attributes that enable him to conduct himself with integrity and commitment and build strong relationships with his clients. A Certified Financial Planner must always act in his clients' best interests and adhere to the Certified Financial Planner Board’s standards of professional conduct.

You must be knowledgeable about various aspects of financial planning to pass the Certified Financial Planner certification examination. The Certified Financial Planner certification exam is a computer-based test composed of two intense three-hour sessions. The test consists of one hundred seventy multiple choice questions, including both stand alone and scenario-based questions. Consequently, the exam for which you are preparing helps to confirm that you have the skill set required to become a Certified Financial Planner. The Certified Financial Planner exam assesses your problem-solving abilities and measures your competency in applying financial planning knowledge in real life situations. Be aware that when you pass the written exam, you are not yet a Certified Financial Planner. There are many more steps and tests you will face as you pass along the entire hiring process. In a little bit, I will give you a brief overview of this course. Before I do, though, I want to tell you a about what you can expect as we go through the material together. Thank you, again, for your interest in this course and for your desire to help people meet their financial goals. If you are ready, let’s begin.

COURSE CONVENTIONS AND CONTENT Welcome to the section on the course conventions and content! When I say course conventions, I mean concepts and methods I will use to present material to you. The course is divided up into several chapters; many of those chapters are split up into smaller sections. Each time I start a new section or chapter, I will give you its name. During the course, I will present small quizzes to you. You will find the quiz material in the Follow-along PDF Manual I will discuss that a bit later. Take the quiz and consult the answer key to see how well you are retaining the course material. Alternatively, I will discuss the correct answers in the lectures, so you can pause the audio, take the quiz, and then listen for the correct answers. Quizzes are typically found near the end of a chapter and consist of ten questions.

To help you summarize and retain as much information as possible, I will finish every chapter with a list of takeaways the most important points to remember from the chapter. There will be typically be ten of these important points; at the end of short chapters, though, I may limit it to five. I mentioned a Follow-along PDF Manual a bit earlier. Each AudioLearn course comes with a companion study guide a Follow-along PDF Manual. You can print out the material or read it in digital format: the choice is yours. These manuals contain summaries of important material as well as links to supplemental information. They contain quizzes as well as your final exam. Should you decide to print out the manual, you can also use it to write additional comments and notes as you see fit. During the course of my lectures, I will probably use the expression “he or she” or “him or her.” While it is a bit more awkward to speak in those terms, it is important for me to acknowledge the fact that more clients are asking for female financial planners. Statistics show that fifty five percent of women between the ages of twenty five and thirty four prefer working with female financial advisors. So, more females are needed in the financial planning industry. If you are a woman listening in, welcome and thank you for your interest in the course! For many learners, repetition is invaluable to effective learning. Soon you will discover that I will repeat many terms and concepts. This is not because I am running out of things to say. I am also not just trying to extend the length of the course. When you hear ideas that have been repeated, even multiple times, take note of them. We consider them to be very important concepts. Speaking of repetition, I whole-heartedly recommend your listening to every lecture in this course at least twice, even more. You are about to be given a great deal of information: facts, terminology, techniques, and suggestions for supplemental study. It will be extremely difficult for you to fully grasp everything in just one listen. Depending on where you are listening, you can take notes as well. Many chapters are best absorbed if you can sit and follow along in the PDF manual as I present the material. If, however, you are only able to listen while commuting to work, forget the manual for now. Consult 3

it when the time is more appropriate. You can still get valuable information just by hearing what I have to say. Now, I want to give you an outline of the material I will present to you. This is just an overview to allow you to hear what to expect. I hope that much of what you hear about this outline motivates you to want to listen and excites you about the prospect of becoming a Certified Financial Planner. My lectures will begin as I give you the basic profile of a Certified Financial Planner. That will include not only the skills you will need, but also the chief duties and responsibilities you can expect upon being hired. From there, I will walk through the process of applying for and taking the Certified Financial Planner certification exam: the eligibility criteria, how to register, how to prepare, what are the test center regulations, and what are the policies related to the results and retakes. Once your application to take the written exam is accepted, what comes next? The written exam is the first step in the hiring process. If you do not pass, then your path to a Certified Financial Planner career ends there. So, I will tell you about the written test. At this point my explanation will just be a summary. Next, we will get into the nitty gritty of the written examination. Here is where you can expect to get most of the quizzes in the course. After providing an introductory overview of the test structure, I will cover material about general test taking. How do you successfully navigate through a written multiple-choice test? What are some effective study habits? What should you do during the time leading up to your test date? As we get into specific topics, I will discuss the Principal Knowledge Topic Category One, the Professional Conduct and Regulation section. I will talk about the Certified Financial Planner Board's code of ethics, rules of conduct, financial planning practice standards, disciplinary rules and procedures. Then I will cover the Principal Knowledge Topic Category Two section, which includes the General Principles of Financial Planning such as the financial planning process, financing strategies, debt management and cash 4

flow management. After that comes a lecture about the Principal Knowledge Topic Category Three, Educational Planning. In this section, I will talk about the gift and income tax strategies, education needs analysis, education savings vehicles, and financial aid. What follows will be the concept of education financing. As we leave the Principal Knowledge Topic Category Three behind, I will get into the specifics of the Principal Knowledge Topic Category Four: Risk Management and Insurance Planning. This section will give you a good idea of the principles of risk and insurance. You will hear about analysis and evaluation of risk exposures, the concepts of annuities, insurance policy and company selection, and property and casualty insurance. Health insurance and cost management, disability and life insurance, business uses of insurance, and insurance needs analysis will also be discussed in this section. Next, I'll talk about Investment Planning in Principal Knowledge Topic Category Five. In this section, you will get a better understanding of bond and stock valuation concepts along with quantitative investment concepts. I will also cover investment strategies, portfolio development and analysis, and asset allocation and portfolio diversification. From Investment Planning, I will shift to Principal Knowledge Topic Category Six, Tax Planning. In this section, I will discuss the fundamental tax law, income tax fundamentals and calculations, characteristics and income taxation of business entities, trusts and estates. You will learn about tax reduction and management techniques as well as tax consequences of property transactions. I will discuss passive activity and at risk rules, tax implications of special circumstances, and charitable contributions and deductions. The next section Principal Knowledge Topic Category Seven will deal with Retirement Savings and Income Planning. I will talk about retirement needs analysis along with social security and Medicare. I will discuss types of retirement plans, qualified plan rules and options, and other tax-advantaged retirement plans. I will also cover regulatory considerations: key factors affecting plan selection for businesses, distribution rules and

3. You should expect a comprehensive set of tests for certification. 4. The Certified Financial Planner certification examination consists of one hundred seventy multiple choice questions. 5. In this course, expect quizzes near the end of each chapter. 6. Make use of the Follow-along PDF Manual. 7. The questions in a Certified Financial Planner certification exam will include both stand alone and scenario-based questions that will test your critical thinking abilities. 8. Items repeated during the lectures are important: remember them. 9. You need to complete all necessary requirements to receive authorization to use your Certified Financial Planner exam marks. 10. Plan to listen to the course at least a couple of times. Well, I hope that I have gotten you motivated to get started. If you are ready to proceed, be sure to have your Follow-along PDF Manual close at hand. Have some pencils or pens available. Get comfortable, and let’s begin!

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