Contents

Acknowledgments

About the Book

Preface

NOTES

About the Practice Questions

About the Contributors

PART ONE Introduction

1 Theory and Practice
1. PART ONE
2. CHAPTER INTRODUCTIONS
3. STUDENT-CENTERED LEARNING OBJECTIVES BASED ON CFP BOARD PRINCIPAL TOPICS
4. IN CLASS
5. BLOOM’S TAXONOMY
6. PROFESSIONAL PRACTICE CAPABILITIES
7. IN PRACTICE
8. PART TWO
9. PART THREE
10. NOTES
2 Function, Purpose, and Regulation of Financial Institutions
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVE
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTES
3 Financial Services Regulations and Requirements
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTES
4 Consumer Protection Laws
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVE
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTES
5 Fiduciary
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVE
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
6 Financial Planning Process
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTES
7 Financial Statements
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTES
8 Cash Flow Management
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
9 Financing Strategies
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
10 Economic Concepts
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTES
11 Time Value of Money
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTE
12 Client and Planner Attitudes, Values, Biases, and Behavioral Finance
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTES
13 Principles of Communication and Counseling
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTES
14 Debt Management
1. CONNECTIONS DIAGRAM
2. OVERVIEW
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
15 Education Needs Analysis
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. NEEDS ANALYSIS CALCULATION
4. LEARNING OBJECTIVES:
5. IN CLASS
6. PROFESSIONAL PRACTICE CAPABILITIES
7. IN PRACTICE
16 Education Savings Vehicles
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
17 Financial Aid (Education)
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
18 Gift and Income Tax Strategies (Education)
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
19 Education Financing
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVE
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
20 Principles of Risk and Insurance
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTES
21 Analysis and Evaluation of Risk Exposures
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
22 Health Insurance and Health Care Cost Management
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTE
23 Disability Income Insurance (Individual)
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTES
24 Long-Term Care Insurance
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTES
25 Annuities
1. CONNECTION DIAGRAM
2. INTRODUCTION
3. FREQUENCY OF CONTRIBUTIONS
4. DISTRIBUTION ALTERNATIVES
5. DISTRIBUTION OPTIONS
6. INVESTMENT OPTIONS
7. TAXATION OF ANNUITIES
8. FEES AND CHARGES IN ANNUITIES
9. PENSION PROTECTION ACT OF 2006
10. LEARNING OBJECTIVES
11. IN CLASS
12. PROFESSIONAL PRACTICE CAPABILITIES
13. IN PRACTICE
14. NOTES
26 Life Insurance (Individual)
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTES
27 Business Uses of Insurance
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTES
28 Insurance Needs Analysis
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVE
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
29 Insurance Policy and Company Selection
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
30 Property and Casualty Insurance
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTE
31 Characteristics, Uses, and Taxation of Investment Vehicles
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTE
32 Types of Investment Risk
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
33 Quantitative Investment Concepts
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
34 Measures of Investment Returns
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTE
35 Asset Allocation and Portfolio Diversiﬁcation
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTES
36 Bond and Stock Valuation Concepts
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTES
37 Portfolio Development and Analysis
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
38 Investment Strategies
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
39 Alternative Investments
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVE
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
40 Fundamental Tax Law
1. CONNECTION DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
41 Income Tax Fundamentals and Calculations
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
42 Characteristics and Income Taxation of Business Entities
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
43 Income Taxation of Trusts and Estates
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
44 Alternative Minimum Tax (AMT)
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
45 Tax Reduction and Management Techniques
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
46 Tax Consequences of Property Transactions
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
47 Passive Activity and At-Risk Rules
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVE
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
48 Tax Implications of Special Circumstances
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
49 Charitable/Philanthropic Contributions and Deductions
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
50 Retirement Needs Analysis
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
51 Social Security and Medicare
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTES
52 Medicaid
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTES
53 Types of Retirement Plans
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTES
54 Qualiﬁed Plan Rules and Options
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
55 Other Tax-Advantaged Plans
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTE
56 Regulatory Considerations
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVE
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
57 Key Factors Affecting Plan Selection for Businesses
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
58 Distribution Rules and Taxation
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
59 Retirement Income and Distribution Strategies
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
60 Business Succession Planning
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTES
61 Characteristics and Consequences of Property Titling
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
62 Gifting Strategies
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTES
63 Estate Planning Documents
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
64 Estate Tax Compliance and Tax Calculation
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
65 Sources for Estate Liquidity
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
66 Types, Features, and Taxation of Trusts
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTES
67 Marital Deduction
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
68 Intra-Family and Other Business Transfer Techniques
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVE
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
69 Postmortem Estate Planning Techniques
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
70 Estate Planning for Non-Traditional Relationships
1. CONNECTIONS DIAGRAM
2. INTRODUCTION
3. LEARNING OBJECTIVES
4. IN CLASS
5. PROFESSIONAL PRACTICE CAPABILITIES
6. IN PRACTICE
7. NOTE
Supplement: CFP Board’s Code of Ethics and Professional Responsibility

PART TWO Introduction

THE JAMESON FAMILY
NOTE
71 Establishing and Deﬁning the Client-Planner Relationship
1. DEFINITION
2. PURPOSE
3. TECHNIQUES
4. IN PRACTICE
5. NOTES
72 Gathering Information Necessary to Fulfill the Engagement
1. DEFINITION
2. PURPOSE
3. TECHNIQUES
4. IN PRACTICE
5. NOTES
73 Analyzing and Evaluating the Client’s Current Financial Status
1. DEFINITION
2. PURPOSE
3. TECHNIQUES
4. IN PRACTICE
5. NOTES
74 Developing Financial Planning Recommendations
1. DEFINING A RECOMMENDATION
2. PURPOSE OF A RECOMMENDATION
3. TECHNIQUES IN DEVELOPING A RECOMMENDATION
4. IN PRACTICE
5. NOTES
75 Communicating the Financial Planning Recommendations
1. DEFINITION
2. PURPOSE
3. IN PRACTICE
4. NOTES
76 Implementing the Financial Planning Recommendations
1. DEFINITION
2. PURPOSE
3. IN PRACTICE
4. NOTE
77 Monitoring the Financial Planning Recommendations
1. DEFINITION
2. PURPOSE
3. TECHNIQUES
4. IN PRACTICE
5. NOTE

PART THREE Introduction

78 Gathering Data from Clients:: Insights from Cognitive Task Analysis and Requirements Engineering
1. APPROACHES TO KNOWLEDGE ELICITATION
2. SOME KNOWLEDGE ELICITATION TECHNIQUES
3. KNOWLEDGE ELICITATION FOR FINANCIAL PLANNING
4. NOTES
79 The Need for Education
1. JOHN AND JOANN
2. KATHY AND MARIO
3. LOU AND KAREN
80 Financial Planning Standards Board
1. INTRODUCTION
2. FINANCIAL PLANNER ABILITIES FRAMEWORK
3. FINANCIAL PLANNING FUNCTIONS
4. CORE FINANCIAL PLANNING COMPETENCIES
5. FUNDAMENTAL FINANCIAL PLANNING PRACTICES
6. FINANCIAL PLANNING COMPONENTS
7. TERMS USED IN THE FINANCIAL PLANNER ABILITIES MATRIX
8. FINANCIAL PLANNER PROFESSIONAL SKILLS
9. FINANCIAL PLANNING KNOWLEDGE BASE
10. FPSB FINANCIAL PLANNING TOPIC LIST
11. FINANCIAL PLANNING CURRICULUM FRAMEWORK
12. LOOKING FORWARD
13. WORKING TOGETHER
14. NOTE
81 Behavioral Finance and Its Implications for Financial Advisors
1. HEURISTIC SIMPLIFICATION
2. SELF-DECEPTION
3. AFFECTIVE AND SOCIAL INFLUENCES
4. UNCERTAINTY, COMPLEXITY, AND TIME CONSTRAINTS
5. IN PRACTICE
6. NOTES
82 Applications of Behavioral Economics in Personal Financial Planning
1. INTRODUCTION
2. THE FINANCIAL DECISION-MAKING PROCESS
3. HEURISTICS AND BIASES
4. PROSPECT THEORY
5. MENTAL ACCOUNTING
6. THE OSTRICH EFFECT
7. RISK TOLERANCE
8. OVERCONFIDENCE
9. FINANCIAL LITERACY
10. SELF-REGULATION
11. PSYCHOPHYSIOLOGICAL ECONOMICS
12. SAVE MORE TOMORROW PROGRAM
13. SUMMARY
14. NOTES
83 Marriage and Family Therapy Applications to Financial Planning
1. APPLICATIONS FROM MARRIAGE AND FAMILY THERAPY
2. SYSTEMS THEORY
3. ECOLOGICAL THEORY
4. SIMILARITIES AND DIFFERENCES BETWEEN SYSTEMS AND ECOLOGICAL THEORY
5. SYSTEMS AND ECOLOGICAL PERSPECTIVES IN THE FINANCIAL PLANNING PROCESS
6. IN PRACTICE
7. STRATEGIES FOR WORKING WITH MULTIPLE FAMILY MEMBERS
8. CONCLUSION
9. NOTES
84 Financial Therapy: The Integration of Financial Planning and Theory
1. INTRODUCTION AND RATIONALE FOR FINANCIAL THERAPY IN FINANCIAL PLANNING
2. KEY CONCEPTS IN FINANCIAL THERAPY
3. MONEY SCRIPTS
4. MONEY DISORDERS
5. MULTICULTURAL CONSIDERATIONS
6. THEORETICAL PERSPECTIVES IN FINANCIAL THERAPY
7. COLLABORATIVE RELATIONAL MODEL
8. TOOLS FOR EDUCATION
9. CONCLUSION
10. NOTES
85 Aging Clients: Special Considerations
1. SEASONS OF RETIREMENT LIFE
2. CRITICAL CONVERSATIONS RELATED TO LIFESTYLE
3. THREATS TO LATER LIFE COGNITIVE FUNCTION
4. CLIENT COGNITIVE ABILITY AND PLANNER FIDUCIARY RESPONSIBILITY
5. ELDER ABUSE
6. CRITICAL CONVERSATIONS RELATED TO DECISION-MAKING CAPACITY
7. CRITICAL CONVERSATIONS RELATED TO HEALTH
8. HOME IS A NEW PLACE
9. HOME IS IN THE SAME PLACE … OR CLOSE TO IT
10. AGING IN PLACE
11. EMERGING HOUSING ALTERNATIVES
12. CRITICAL CONVERSATIONS RELATED TO HOUSING
13. LATER TIMED PARENTING
14. LATER LIFE DIVORCE
15. LATER LIFE COHABITATION
16. MAY–DECEMBER MARRIAGE
17. CAREGIVING CONCERNS
18. RECEIVING CARE
19. CLIENT CONVERSATIONS CONCERNING FAMILY
20. PROFESSIONAL PRACTICE CONSIDERATIONS
21. NOTES
86 Accounting for Time: Important Distinctions and Concepts for Financial Planners
1. TIME PERSPECTIVE THEORY
2. PREDICTING BEHAVIOR USING TIME PERSPECTIVES
3. EMPIRICAL EVIDENCE
4. USING TIME PERSPECTIVE TO HELP CLIENTS
5. SUMMARY
6. NOTES
87 The Psychology of Decisions: A Short Tutorial
1. INTRODUCTION
2. ATTRIBUTE SUBSTITUTION: THE AVAILABILITY, REPRESENTATIVENESS, AND AFFECT HEURISTICS
3. THE REPRESENTATIVENESS HEURISTIC
4. THE AVAILABILITY HEURISTIC
5. THE AFFECT HEURISTIC
6. ANCHORING
7. LOSS AVERSION
8. UNREALISTIC OPTIMISM
9. CONCLUSION
10. NOTES

CONCLUSION

88 Moving Forward
1. DEVELOPMENT OF A PROFESSION
2. CAREER PATH
3. DEMOGRAPHICS
4. RESEARCH IN FINANCIAL PLANNING
5. FOCUS ON PLANNING
6. NOTES

Index

Access Code

EULA

List of Illustrations

Chapter 6

Figure 6.1 The Systematic Financial Planning Process

Chapter 78

Figure 78.1 A Concept Map on the Topic of the U.S. Government
Figure 78.2 Financial Planning Concept Map

Chapter 83

Figure 83.1 Systemic Model of Family and Business
Figure 83.2 Similarities and Differences between Systems and Ecological Theory

Chapter 85

Figure 85.1 Population 65+ in the United States, 1900–2050
Figure 85.2 Budget Shares Illustrated
Figure 85.3 Housing Continuum
Figure 85.4 Phased Relocation
Figure 85.5 Marital Age Difference

Chapter 86

Figure 86.1 Categories of Time Orientation

About the Book

CFP Board is pleased to develop this important work that outlines the knowledge, actions, and contexts associated with financial planning. This book represents the advancement in the profession by practitioners, educators, and researchers in moving toward a universal body of knowledge for the discipline as a whole. This publication is not meant to replace any existing textbook or provide any specific examination preparation, but rather to further the theoretical knowledge base of our growing discipline.

This book serves the entire financial planning profession, including students, faculty, researchers, and practitioners in financial planning and related professions. The book was designed to treat theory and practice not as binary functions, but as one entity, where content was defined but also applied, both within the learning environment and in practice. Part One outlines the 78 topics required to meet the CFP Board Education requirement. Each topic is defined specifically with regard to financial planning and presented in the form of student-centered Learning Objectives. These objectives indicate what the student should be able to do relative to a given concept. The In Class section illustrates ways to facilitate higher-order cognitive thinking relative to each topic in both the traditional classroom as well as the online learning environment. Professional Practice Capabilities outline what practitioners should be able to do relative to three distinct career stages. Vignettes in each chapter, In Practice, illustrate how each particular concept is applied and/or exists in practice. Part Two outlines the domains that are part of the CFP Board Examination requirement. This section defines each of the domains and presents the associated Techniques for completing the domains as well as how they occur In Practice. There are questions specific to each of the chapters in Part One that assess the reader’s content knowledge relative to each of the topic areas. Students can benefit from these questions to test their understanding of these vital areas, as well as CFP^® professionals who can also choose to obtain the full 28 credit hours by taking and passing the test. Visit www.wiley.com/go/wileycfpboard2e for more details.

Part Two is devoted to the financial planning process, illustrating the rationale, techniques, and contexts where the process takes place. In this edition, a case, The Jameson Family, runs through each stage of the financial planning process, outlining how each step affects the context as well as how the context can impact each step.

Finally, Part Three focuses on the interdisciplinary nature of financial planning, focusing on both the theory and practical implications of related disciplines such as behavioral finance, marriage and family therapy, psychology, communication, and others. The purpose of Part Three is to bring new theory into this discipline for faculty and researchers while driving implications related to this theory directly to practitioners.

It is important to note that this book is designed to have universal applicability for the profession of personal financial planning. However, certification and practice requirements vary depending upon location of residence. The reader is encouraged to visit www.CFP.net for information about requirements for certification within the United States and www.fpsb.org for information about requirements outside of the United States.

Preface

Charles R. Chaffin, EdD

CFP Board

Personal financial planning has grown and evolved considerably over the past several years. The field hardly existed just four decades ago.¹ As the population’s financial planning needs have grown, so too has practice. As of 2015, there are over 71,000 CFP^® professionals in the United States, and the designation exists in 24 countries worldwide.² Many labor forecasts are predicting a significant rise in the number of employment opportunities in personal financial planning even in the midst of a stagnant global economy. In order to meet this need, an increasing number of institutions and countries are preparing and certifying individuals to become personal financial planners. With an increased need has also come a growing complexity in the financial planning needs of the client. This increased complexity requires higher skill on the part of the practitioner. Practitioners must demonstrate proficiency relative to a broad range of content areas, from retirement planning and estate planning to insurance, taxation, and investments. Within all of this complexity, financial planners are also required to communicate with the client in an effective manner. This communication may be as involved as presentation of complex information in an accessible manner or as simple as listening and empathizing with a client regarding a serious life event. Given the increased need and complexity of this growing field, personal financial planning has taken some important steps in the past several decades. However, has it matured into a profession?

In the last analysis, the law is what the lawyers are. And the law and the lawyers are what the law schools make them.

—Felix Frankfurter³

A profession, at its foundation, entails a specialized body of knowledge and skills. Education precedes any other attribute of a profession. Wilensky explains how the University of Pennsylvania Medical School was founded in 1795, long before the development of the American Medical Association in 1847.⁴ As Abbott suggests, there have to be doctors before one can develop an association of them.⁵ This specialized body of knowledge is developed through practical experience as well as empirical study of every facet of the discipline. The knowledge gained from practical experience and research is then disseminated to current and future professionals. The dissemination, and therefore acquisition and application, of this body of knowledge, occurs at institutions of higher learning where prospective professionals learn how and when to solve real-world problems relative to a chosen profession. At these institutions, the individuals entrusted to prepare these future professionals have both a high level of education relative to this field of study as well as practical experience. The experiences of the faculty members within these institutions enables them to devise learning experiences that bring the subject matter to life, offering opportunities for the prospective professionals not only to hone their new skills relative to a specific problem, but also to learn when to utilize these skills in contexts they will encounter in practice.

In financial planning, the colleges and universities that offer CFP Board registered programs are locations where individuals learn specialized knowledge relative to several content areas across financial planning. This specialized knowledge is more than just the memorization of a series of inert facts, but is instead a basic theoretical understanding, most immediately followed by application and creation that directly relate to contextual settings within the discipline of personal financial planning. The aspiring professional needs to be able not only to comprehend and subsequently apply basic theoretical content relative to a given content area, but also to ascertain how this content area directly relates to the other basic content areas across the discipline of financial planning. For example, estate planning and taxation do not exist in a vacuum relative to a client’s needs, but may directly relate to the investment and retirement needs of the future client. The financial planning professional must have a working knowledge of the relationships among these key and vital content areas.

The education of the financial planning professional goes beyond basic theoretical content and actions in practice, but also teaches important communication skills. The successful financial planning professional must be able to develop a plan for the future client relative to the client’s needs and situation, and, just as importantly, must communicate it to this client in an effective manner. Successful personal financial planners are ones who can effectively present, articulate, listen, and in many cases show care and empathy for their clients. This success is no different from that in many other disciplines where communication and engagement are vital to success. In his book, Blink: The Power of Thinking without Thinking, Malcolm Gladwell discusses the reasons why doctors get sued by their patients:

The overwhelming number of people who suffer an injury due to the negligence of a doctor never file a malpractice suit at all. In other words, patients don’t file lawsuits because they’ve been harmed by shoddy medical care. Patients file lawsuits because they’ve been harmed by shoddy medical care and something else happens to them. . . . What comes up again and again in malpractice cases is that patients say they were rushed or ignored or treated poorly.⁶

It is, therefore, the relationship between the personal financial planning professional and the client that is a key contributor to success. It is not that doctors, lawyers, or personal financial planning professionals do not need to have achieved a high level of understanding and application relative to the demands of their field of study; it merely means that these professionals must also possess the ability to communicate, engage, and, on some level, care for their clients and patients. The act of communicating in personal financial planning is one that requires education, where the individual learns how to present complex areas such as investments in a way that is both accessible and relevant to each client.

Within any society, professions hold an extraordinary amount of power and influence. Members of this group have a specialized expertise that provides great value to the population as a whole. This value to society is inherently provided with little or no self-interest.⁷ This notion of specialization also creates an element of autonomy for the profession, as these individuals exercise authority in determining right and wrong relative to their service.⁸ Individuals within this profession have the responsibility to act in a competent, ethical manner that will be in the best interests of the greater population. Thus, a given trade or occupation must have professional ethics in order to be called a profession.

As Hughes suggests:

Not only do the practitioners, by virtue of gaining admission to the charmed circle of the profession, individually exercise a license to do things others do not, but collectively they presume to tell society what is good and right for it in a broad and crucial aspect of life. Indeed, they set the very terms of thinking about it. When such a presumption is granted as legitimate, a profession in the full sense has come into being.⁹

Within this license to which Hughes is referring, practitioners in a given profession must have the highest level of competence in serving the public as well as specific guidelines relative to ethics and professional conduct. This competence and ethical conduct is recognized as valuable to the general population. Without this recognition from the public, the profession would likely be unsustainable.

Almost all professions have some sort of code of ethics. The first profession to establish a modern code of ethics was medicine in the eighteenth century.¹⁰ The medical profession developed these codes to ease internal strife among members of the profession as well as to raise the status of the profession as a whole. The profession felt the need to defend itself from fraudulent individuals who misleadingly characterized themselves as medical experts. Ethical codes most often occur in writing and generally develop after a profession becomes organized. These codes require that the individual maintain a higher level of standards than what is required by law.¹¹ The requirements are not developed in isolation, but rather with the objective of service to the population as a whole. These codes outline how professionals are to pursue a common cause with minimal cost to themselves or to the general population.¹² The requirements also evolve based on events, such as government law and economic and social changes in the environment. For example, in medieval England, in response to growing hostility toward the legal profession, regulation of the legal profession began with adoption of a series of requirements to curb incompetence, unethical practices, and conflicts of interest.¹³ It is important to note that a code also protects members from certain pressures, such as cutting corners, cheating, or other forms of misconduct. A code of ethics is a guide to the professional, and the profession at large, concerning certain practices and expectations regarding aspects of one’s service to the population as a whole. Practitioners in a given profession benefit from a code of ethics that is required of their members, and therefore they should follow this code for the benefit of the entire group of professionals. Further, professionals must adhere to the code of conduct or be subject to discipline.

Financial planning contains a set of Standards of Professional Conduct that outline the ethical standards for CFP^® professionals. The CFP Board’s Code of Ethics expresses the professional’s recognition of his or her “responsibilities to the public, to clients, to colleagues, and to employers.”¹⁴ Given the important responsibilities of the personal financial planner, the CFP^® professional must adhere to a variety of rules of conduct in order to serve the public in a competent, ethical manner. It is not enough, however, to merely have a code of ethics; it is vital that there exists evidence of enforcement of this code as well.

Individuals within a profession must identify themselves as part of that profession. The objective of service to the general population and the notion of competence and ethical responsibilities associated with such service become a guiding philosophy to members of a given profession. Practitioners in a given profession, therefore, identify themselves as service-oriented, competent, and ethical, and most importantly, their actions and decisions reflect this philosophy and ultimately their membership in a given profession. Individuals who are attracted to a given profession are attracted because of the guiding principles of the profession.

Organizations within a profession can provide unity to practitioners relative to common goals and shared problems. Associations within a profession provide opportunities for engagement through social functions as well as group problem solving of shared concerns. Associations work so that the practitioner does not cope with social and economic matters relative to the profession alone. Within financial planning, the Financial Planning Association (FPA^®) and the National Association of Personal Financial Advisors (NAPFA) provide a voice to practitioners regarding issues and challenges within financial planning as well as opportunities to engage through conference and electronic means.

Personal financial planning has grown and evolved considerably over the past several decades. As described earlier, the field contains many of the primary attributes of a profession. The education, objectives, professional code of ethics, and associations have provided financial planning with the framework to become a robust profession. However, there is considerable work yet to be done in each of these areas. Education of current and future practitioners requires additional qualified faculty providing contextual learning experiences based on practice and empirical research. Leaders in education and the profession must be equally skilled in professional practice as well as in conducting lines of inquiry that will challenge and refine all areas of practice. Practitioners must continue to wholeheartedly embrace the notion of service and the responsibilities that come from serving an important function to the general population. Professional standards and ethical codes within financial planning must continue to be followed and enforced by leaders in the profession such as the CFP Board and the Financial Planning Standards Board. Finally, professional organizations must continue to provide a platform for practitioners to engage one another as well as explore critical problems and opportunities within this exciting and growing field.

It is our hope that this book, a handbook outlining the what, why, how, and when of this exciting field, can enable personal financial planning to take one more critical step toward becoming a mature profession.

Financial Planning Competency Handbook

Second Edition

Acknowledgments

About the Book

Preface

NOTES

About the Practice Questions