Financial Planning Competency Handbook, Second Edition PDF by Charles R. Chaffin

Financial Planning Competency Handbook, Second Edition
Edited by Charles R. Chaffin

Contents

Acknowledgments
About the Book
Preface
NOTES
About the Practice Questions
About the Contributors
PART ONE Introduction
1 Theory and Practice
PART ONE
CHAPTER INTRODUCTIONS
STUDENT-CENTERED LEARNING OBJECTIVES BASED ON CFP BOARD
PRINCIPAL TOPICS
IN CLASS
BLOOM’S TAXONOMY
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
PART TWO
PART THREE
NOTES
2 Function, Purpose, and Regulation of Financial Institutions
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVE
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTES
3 Financial Services Regulations and Requirements
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTES
4 Consumer Protection Laws
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVE
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTES
5 Fiduciary
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVE
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
6 Financial Planning Process
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTES
7 Financial Statements
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTES
8 Cash Flow Management
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
9 Financing Strategies
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
10 Economic Concepts
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTES
11 Time Value of Money
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTE
12 Client and Planner Attitudes, Values, Biases, and Behavioral Finance
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTES
13 Principles of Communication and Counseling
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTES
14 Debt Management
CONNECTIONS DIAGRAM
OVERVIEW
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
15 Education Needs Analysis
CONNECTIONS DIAGRAM
INTRODUCTION
NEEDS ANALYSIS CALCULATION
LEARNING OBJECTIVES:
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
16 Education Savings Vehicles
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
17 Financial Aid (Education)
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
18 Gift and Income Tax Strategies (Education)
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
19 Education Financing
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVE
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
20 Principles of Risk and Insurance
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTES
21 Analysis and Evaluation of Risk Exposures
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
22 Health Insurance and Health Care Cost Management
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTE
23 Disability Income Insurance (Individual)
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTES
24 Long-Term Care Insurance
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTES
25 Annuities
CONNECTION DIAGRAM
INTRODUCTION
FREQUENCY OF CONTRIBUTIONS
DISTRIBUTION ALTERNATIVES
DISTRIBUTION OPTIONS
INVESTMENT OPTIONS
TAXATION OF ANNUITIES
FEES AND CHARGES IN ANNUITIES
PENSION PROTECTION ACT OF 2006
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTES
26 Life Insurance (Individual)
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTES
27 Business Uses of Insurance
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTES
28 Insurance Needs Analysis
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVE
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
29 Insurance Policy and Company Selection
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
30 Property and Casualty Insurance
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTE
31 Characteristics, Uses, and Taxation of Investment Vehicles
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTE
32 Types of Investment Risk
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
33 Quantitative Investment Concepts
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
34 Measures of Investment Returns
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTE
35 Asset Allocation and Portfolio Diversication
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTES
36 Bond and Stock Valuation Concepts
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTES
37 Portfolio Development and Analysis
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
38 Investment Strategies
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
39 Alternative Investments
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVE
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
40 Fundamental Tax Law
CONNECTION DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
41 Income Tax Fundamentals and Calculations
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
42 Characteristics and Income Taxation of Business Entities
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
43 Income Taxation of Trusts and Estates
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
44 Alternative Minimum Tax (AMT)
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
45 Tax Reduction and Management Techniques
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
46 Tax Consequences of Property Transactions
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
47 Passive Activity and At-Risk Rules
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVE
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
48 Tax Implications of Special Circumstances
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
49 Charitable/Philanthropic Contributions and Deductions
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
50 Retirement Needs Analysis
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
51 Social Security and Medicare
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTES
52 Medicaid
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTES
53 Types of Retirement Plans
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTES
54 Qualied Plan Rules and Options
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
55 Other Tax-Advantaged Plans
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTE
56 Regulatory Considerations
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVE
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
57 Key Factors Affecting Plan Selection for Businesses
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
58 Distribution Rules and Taxation
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
59 Retirement Income and Distribution Strategies
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
60 Business Succession Planning
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTES
61 Characteristics and Consequences of Property Titling
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
62 Gifting Strategies
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTES
63 Estate Planning Documents
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
64 Estate Tax Compliance and Tax Calculation
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
65 Sources for Estate Liquidity
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
66 Types, Features, and Taxation of Trusts
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTES
67 Marital Deduction
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
68 Intra-Family and Other Business Transfer Techniques
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVE
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
69 Postmortem Estate Planning Techniques
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
70 Estate Planning for Non-Traditional Relationships
CONNECTIONS DIAGRAM
INTRODUCTION
LEARNING OBJECTIVES
IN CLASS
PROFESSIONAL PRACTICE CAPABILITIES
IN PRACTICE
NOTE
Supplement: CFP Board’s Code of Ethics and Professional Responsibility
PART TWO Introduction
THE JAMESON FAMILY
NOTE
71 Establishing and Dening the Client-Planner Relationship
DEFINITION
PURPOSE
TECHNIQUES
IN PRACTICE
NOTES
72 Gathering Information Necessary to Fulfill the Engagement
DEFINITION
PURPOSE
TECHNIQUES
IN PRACTICE
NOTES
73 Analyzing and Evaluating the Client’s Current Financial Status
DEFINITION
PURPOSE
TECHNIQUES
IN PRACTICE
NOTES
74 Developing Financial Planning Recommendations
DEFINING A RECOMMENDATION
PURPOSE OF A RECOMMENDATION
TECHNIQUES IN DEVELOPING A RECOMMENDATION
IN PRACTICE
NOTES
75 Communicating the Financial Planning Recommendations
DEFINITION
PURPOSE
IN PRACTICE
NOTES
76 Implementing the Financial Planning Recommendations
DEFINITION
PURPOSE
IN PRACTICE
NOTE
77 Monitoring the Financial Planning Recommendations
DEFINITION
PURPOSE
TECHNIQUES
IN PRACTICE
NOTE
PART THREE Introduction
78 Gathering Data from Clients:: Insights from Cognitive Task Analysis and
Requirements Engineering
APPROACHES TO KNOWLEDGE ELICITATION
SOME KNOWLEDGE ELICITATION TECHNIQUES
KNOWLEDGE ELICITATION FOR FINANCIAL PLANNING
NOTES
79 The Need for Education
JOHN AND JOANN
KATHY AND MARIO
LOU AND KAREN
80 Financial Planning Standards Board
INTRODUCTION
FINANCIAL PLANNER ABILITIES FRAMEWORK
FINANCIAL PLANNING FUNCTIONS
CORE FINANCIAL PLANNING COMPETENCIES
FUNDAMENTAL FINANCIAL PLANNING PRACTICES
FINANCIAL PLANNING COMPONENTS
TERMS USED IN THE FINANCIAL PLANNER ABILITIES MATRIX
FINANCIAL PLANNER PROFESSIONAL SKILLS
FINANCIAL PLANNING KNOWLEDGE BASE
FPSB FINANCIAL PLANNING TOPIC LIST
FINANCIAL PLANNING CURRICULUM FRAMEWORK
LOOKING FORWARD
WORKING TOGETHER
NOTE
81 Behavioral Finance and Its Implications for Financial Advisors
HEURISTIC SIMPLIFICATION
SELF-DECEPTION
AFFECTIVE AND SOCIAL INFLUENCES
UNCERTAINTY, COMPLEXITY, AND TIME CONSTRAINTS
IN PRACTICE
NOTES
82 Applications of Behavioral Economics in Personal Financial Planning
INTRODUCTION
THE FINANCIAL DECISION-MAKING PROCESS
HEURISTICS AND BIASES
PROSPECT THEORY
MENTAL ACCOUNTING
THE OSTRICH EFFECT
RISK TOLERANCE
OVERCONFIDENCE
FINANCIAL LITERACY
SELF-REGULATION
PSYCHOPHYSIOLOGICAL ECONOMICS
SAVE MORE TOMORROW PROGRAM
SUMMARY
NOTES
83 Marriage and Family Therapy Applications to Financial Planning
APPLICATIONS FROM MARRIAGE AND FAMILY THERAPY
SYSTEMS THEORY
ECOLOGICAL THEORY
SIMILARITIES AND DIFFERENCES BETWEEN SYSTEMS AND
ECOLOGICAL THEORY
SYSTEMS AND ECOLOGICAL PERSPECTIVES IN THE FINANCIAL
PLANNING PROCESS
IN PRACTICE
STRATEGIES FOR WORKING WITH MULTIPLE FAMILY MEMBERS
CONCLUSION
NOTES
84 Financial Therapy: The Integration of Financial Planning and Theory
INTRODUCTION AND RATIONALE FOR FINANCIAL THERAPY IN
FINANCIAL PLANNING
KEY CONCEPTS IN FINANCIAL THERAPY
MONEY SCRIPTS
MONEY DISORDERS
MULTICULTURAL CONSIDERATIONS
THEORETICAL PERSPECTIVES IN FINANCIAL THERAPY
COLLABORATIVE RELATIONAL MODEL
TOOLS FOR EDUCATION
CONCLUSION
NOTES
85 Aging Clients: Special Considerations
SEASONS OF RETIREMENT LIFE
CRITICAL CONVERSATIONS RELATED TO LIFESTYLE
THREATS TO LATER LIFE COGNITIVE FUNCTION
CLIENT COGNITIVE ABILITY AND PLANNER FIDUCIARY
RESPONSIBILITY
ELDER ABUSE
CRITICAL CONVERSATIONS RELATED TO DECISION-MAKING CAPACITY
CRITICAL CONVERSATIONS RELATED TO HEALTH
HOME IS A NEW PLACE
HOME IS IN THE SAME PLACE … OR CLOSE TO IT
AGING IN PLACE
EMERGING HOUSING ALTERNATIVES
CRITICAL CONVERSATIONS RELATED TO HOUSING
LATER TIMED PARENTING
LATER LIFE DIVORCE
LATER LIFE COHABITATION
MAY–DECEMBER MARRIAGE
CAREGIVING CONCERNS
RECEIVING CARE
CLIENT CONVERSATIONS CONCERNING FAMILY
PROFESSIONAL PRACTICE CONSIDERATIONS
NOTES
86 Accounting for Time: Important Distinctions and Concepts for Financial Planners
TIME PERSPECTIVE THEORY
PREDICTING BEHAVIOR USING TIME PERSPECTIVES
EMPIRICAL EVIDENCE
USING TIME PERSPECTIVE TO HELP CLIENTS
SUMMARY
NOTES
87 The Psychology of Decisions: A Short Tutorial
INTRODUCTION
ATTRIBUTE SUBSTITUTION: THE AVAILABILITY, REPRESENTATIVENESS,
AND AFFECT HEURISTICS
THE REPRESENTATIVENESS HEURISTIC
THE AVAILABILITY HEURISTIC
THE AFFECT HEURISTIC
ANCHORING
LOSS AVERSION
UNREALISTIC OPTIMISM
CONCLUSION
NOTES
CONCLUSION
88 Moving Forward
DEVELOPMENT OF A PROFESSION
CAREER PATH
DEMOGRAPHICS
RESEARCH IN FINANCIAL PLANNING
FOCUS ON PLANNING
NOTES
Index