CFP Certification Korea: financial-planning foundations flashcards

35 cards. Read the term and the definition here. The deck at the top of this page is optional.

Net worth

The difference between a household’s stated assets and liabilities at a specified date, distinct from recurring income.

Cash-flow statement

A record of receipts and payments over a period, used to identify surplus, deficit and timing mismatches.

Liquidity

The ability to meet payments using resources available at the needed time without unacceptable delay or loss.

Planning horizon

The period over which a particular goal and its funding need are evaluated, which can differ across goals.

Risk capacity

The financial ability to absorb adverse outcomes without undermining essential obligations, distinct from emotional willingness to take risk.

Engagement scope

The agreed services, responsibilities and boundaries of the planner-client relationship, including relevant information and compensation arrangements.

Monitoring

Periodic assessment of implementation, outcomes and changing circumstances to decide whether a financial plan requires adjustment.

Diversification

Combining exposures to reduce dependence on a single source of risk, without eliminating all possible investment losses.

Concentration risk

The potential adverse effect of excessive dependence on one issuer, asset class, sector or other common exposure.

Duration approximation

An estimate of percentage bond-price change from a small yield movement, subject to the model and neglected convexity effects.

Sequence risk

The effect of the order of investment returns on outcomes when contributions or withdrawals occur during the investment period.

Strategic allocation

A long-term target mix of assets chosen to reflect the investor’s objectives, constraints and capacity for risk.

Liquidity risk

The risk that an investment cannot be sold or accessed at the required time and acceptable price.

Currency exposure

Sensitivity of a home-currency investment result to exchange-rate movements affecting foreign-currency assets, income or liabilities.

Defined benefit

An arrangement defining benefits through a specified formula, distinct from simply promising the member a fixed account contribution.

Defined contribution

An arrangement defining contributions while the eventual account outcome depends on investment results, fees and applicable withdrawal arrangements.

IRP

An individual retirement pension account used within Korean rules for portability or additional retirement saving, distinct from an unrestricted brokerage account.

National Pension

Korea’s contributory public pension arrangement, whose eligibility and benefit rules differ from Basic Pension and workplace schemes.

Basic Pension

A Korean old-age support program with its own income-recognition and eligibility framework, not an automatic award for every pension contributor.

Housing pension

A home-secured retirement-income arrangement whose conditions, guarantee costs, occupancy and settlement rules require product-specific verification.

Longevity risk

The risk of living longer than the period for which resources were planned, increasing the need for durable income.

Tax deduction

An amount that reduces the relevant taxable base under the applicable rules, distinct from a direct reduction of calculated tax.

Tax credit

An amount applied against calculated tax liability subject to the applicable conditions, rather than a reduction of the income base.

Marginal rate

The rate applied to the next relevant increment of taxable amount within the specified rate structure.

Effective rate

Tax measured relative to a specified total income or taxable base, whose denominator should be made explicit.

Beneficiary designation

Identification of the person entitled under a contract or arrangement, which need not resolve every associated tax or inheritance question.

Estate liquidity

Resources accessible to meet obligations and expenses associated with succession without assuming immediate sale of illiquid property.

Transition provision

A rule specifying how a legal change applies across dates, transactions or coverage periods instead of treating every case identically.

Policyholder

The party entering the insurance contract and holding its contractual rights and obligations, which can differ from the insured person.

Insured person

The person whose life or health is the subject of the relevant insurance risk under the contract.

Beneficiary

The person entitled to the specified insurance proceeds under the contract, subject to its conditions and applicable law.

Deductible

The portion of a covered loss or expense retained by the insured under the contract’s stated terms.

Exclusion

A condition or category outside the policy’s promised coverage, which must be read with the actual contract.

Risk transfer

Allocation of a specified financial consequence to another party under an arrangement such as insurance, without eliminating the event itself.

Needs analysis

Assessment of the financial protection required after considering obligations, dependents, existing resources and relevant household or business circumstances.