CFP Board. HandbooK. Second Edition

Transcription

1 CFP Board Financial Planning Competencv HandbooK Second Edition CHARLES R. CHAFFIN, EdD Editor WlLEY

2 Contents Acknowledgments About the Book Preface About tiie Practice Questions About the Contributors xiii xv xvii xxiii xxv PART ONE Intnoduction 1 Theopy and Practice 5 Function, Purpose, and Regulation ol Financial Institutions 15 Johri Grable, PhD, CFP, University of Georgia Sonya L. Britt, PhD, CFP, Kansas State University Financial Services Regulations and Requirements 25 Sonya L. Britt, PhD, CFP, Kansas State University Consumer Protection Laws 35 Sonya L. Britt, PhD, CFP, Kansas State University Fiduciary 45 Martie Gilten, PhD, University of Florida Financial Flanning Process 51 John Grable, PhD, CFP, University of Georgia Ronald A. Sages, PhD, AEP, CFP, CTFA, EA, Kansas State University Financial Statements 63 v

3 8 Cash Flow Management Martie Gilten, PhD, University of Florida 9 Financing Strategies Martie Gilten, PhD, University of Florida Jorge Ruiz-Menjivar, University of Georgia 10 Economic Concepts 11 Time Value of Money Jorge Ruiz-Menjivar, University of Georgia 12 Client and Planner Attltudes, Values, Biases, and Behavioral Finance 13 Principles of Communication and Counseling Kristy L. Archuleta, PhD, LMFT, Kansas State University 14 Debt Management Joseph W. Goetz, PhD, University of Georgia 15 Education Needs Analysis Taylor Spangler, MS, University of Florida Sailesh Acharya, University of Florida 16 Education Savings Vehicles 17 Financial Aid (Education) 18 Gift and Income Tax Strategies (Education) 19 Education Financing

4 Contents vii 20 Principles of Risk and Insurance 173 Dave Yeske, DBA, CFP 0, Golden Gate University 21 Analysis and Evaluation of Risk Exposures Heatth Insurance and Health Care Cost Management 189 Sharon A. Bums, PhD, CPA (Inactive) 23 Disability Income Insurance (Individual) Long-Term Care Insurance 205 Sharon A. Bums, PhD, CPA (Inactive) 25 Annuities 213 John Gilliam, PhD, CFP, Texas Tech University 26 Life Insurance (Individual) Business Uses of Insurance 233 L Ann Coulson, PhD, CFP, Kansas State University John Gilliam, PhD, CFP, Texas Tech University 28 Insurance Needs Analysis Insurance Policy and Company Selection Property and Casualty Insurance 263 Derek R. Lawson, MS, Sonas Financial Group, Inc. and Kansas State University Sarah D. Asebedo, MS, CFP, Virginia Tech 31 Characteristics, Uses, and Taxation of Investment Vehicles 275 Swarn Chatterjee, PhD, University of Georgia 32 Types of Investment Risk 283 Thomas Warschauer, PhD, CFF, San Diego State University 33 Quantitative Investment Concepts Measures of Investment Returns 299

5 viii CONTENTS 35 Asset Allocation and Portfolio Diversification Bond and Stock Valuation Concepts Portfolio Development and Analysis 325 Thomas Warschauer, PhD, CFF, San Diego State University 38 Investment Strategies 335 Dave Yeske, DBA, CFP Golden Gate University 39 Alternative Investments 343 L Michael Ladd, CFA, CAIA, CMT, CFP 40 Fundamental Tax Law Income Tax Fundamentals and Calculations Characteristics and Income Taxation of Business Entities 373 Webster Hewitt, CPA, CFP, University of Georgia 43 Income Taxation of Trusts and Estates Alternative Minimum Tax (AMT) 391 Webster Hewitt, CPA, CFP, University of Georgia 45 Tax Reduction and Management Techniques Tax Consequences of Property Transactions 409 Lance Palmer, PhD, CPA, CFF l, University of Georgia 47 Passive Activity and At-Risk Rules Tax Implications of Special Circumstances Charitable/Philanthropic Contributions and Deductions 431 Webster Hewitt, CPA, CFF, University of Georgia 50 Retirement Needs Analysis 43g

6 Contents ix 51 Social Security and Medicare 447 Sarah D. Asebedo, MS, CFP, Virginia Tech 52 Medicaid 463 Katie Seay, CFP, The Trust Company 53 Types of Retirement Plans 471 John Grable, PhD, CFP, University of Georgia 54 Qualilied Plan Rules and Options Other Tax-Advantaged Plans Regulatory Considerations Key Factors Affecting Plan Selection for Businesses Distribution Rules and Taxation Retirement Income and Distribution Strategies Business Succession Flanning 515 Joseph W. Goetz, PhD, University of Georgia Kevin Valentino, MS, University of Georgia 61 Characteristics and Consequences of Property Titling Gifting Strategies Estate Flanning Documenta 541

7 64 Estate Tax Compliance and Tax Calculation Elissa Buie, MBA, CFP 3, Golden Gate University 65 Sources for Estate Uquidity 66 Types, Features, and Taxation of Trusts 67 Marital Deduction 68 Intra-Famiiy and Other Business Transfer Techniques 69 Postmortem Estate Flanning Techniques 70 Estate Flanning for Non-fraditional Relationships Supplement: CFP Board s Code of Ettiics and Professional Responsibility PARTTWO Introduction 71 Establishing and Definnig the Client-Planner Relationship 72 Gathering Information Necessary to Fulfill the Engagement 73 Analyzing and Evaluating the Clients current Financial Status Vickie Hampton, PhD, CFP, Texas Tech University 74 Developing Financial Flanning Recommendations 75 Communicating the Financial Flanning Recommendations

8 Contents xi 76 Implementing the Financial Flanning Recommendations Ronald A. Sages, PhD, AEP, CFP, CTFA, EA Kansas State University 77 Monitoring the Financial Flanning Recommendations PARTTHREE Intnoduction Gathering Data Irom Clients: Insights from Cognitive Task Analysis and Requirements Engineering 687 Kelly S. Steeiman, PhD, Michigan Technological University Jason S. McCarley, PhD, Flinders University 79 The Need for Education 703 Joyce Schnur, CFP, MBA, ChFC, Kaplan University 80 Financial Flanning Standards Board 709 Michael Snowdon, CFP, Financial Planning Standards Board 81 Behavioral Finance and Its Implications for Financial Advisors 737 Keith Redhead, PhD, Coventry University 82 Applications of Behavioral Economics in Personal Financial Planning 751 Swarn Chatterjee, PhD, University of Georgia Joseph W. Goetz, PhD, University of Georgia 83 Marriage and Family Therapy Applications to Financial Planning 763 Kristy L. Archuleta, PhD, LMFT, Kansas State University D. Bruce Ross III, MS, University of Georgia 84 Financial Therapy: The Integration of Financial Flanning and Theory 779 Kristy L. Archuleta, PhD, LMFT, Kansas State University Bradley T. Klontz, PsyD, CFP, Kansas State University Sonya L. Britt, PhD, CFP, Kansas State University 85 Aging Clients: Special Considerations 795 DeannaL. Sharpe, PhD, CFP, University of Missouri

9 xii CONTENTS 86 Accounting for Time: Important Distinctions and Concepts for Financial Planners 829 John Grable, PhD, CFP, University of Georgia Robert Rodermund, MS, Linden wood University 87 The Psychology of Decisions: A Short Tutorial 843 Jason S. McCariey, PhD, Fiinders University Kelly S. Steelman, PhD, Michigan Technoiogicai University John Grable, PhD, CFP, University of Georgia CONCLUSION 88 Moving Forwand 861 Vickie Hampton, PhD, CFP, Texas Tech University Lance Paimer, PhD, CPA, CFP, University of Georgia Thomas Warschauer, PhD, CFP 3, San Diego State University Index 879