Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

 
 
 
Frequently Asked Questions
 

Q. The Essay Exam

A.              Advisors are allowed to use any material to create answers to the essay portion of the test.  Advisor shall sign a sworn statement that they did not receive help from other individuals on both the multiple choice or essay portion of the test.  Any advisor violating this honor code shall be forever barred from using the CWPP™ and CAPP™ credentials or being associated it the WPI.

             The reason for an open book test essay test is very simple.  Whether an advisor (CPA, attorney, accountant, insurance advisors, financial planner or real estate broker) is helping a client on asset protection, estate planning, tax planning, corporate structure, financial planning or any other topic, the advisor is not going to give definitive answers on the spot when collecting the facts of a particular client’s circumstances.   

            Good advisors collect information and data from clients, do independent research and take time to think about what advice would be best for that particular client.  An advisor that completes the educational courses in the CWPP™ or CAPP™ programs will have learned a great deal.  However, no one can learn all the “advanced” material overnight or even in a three day seminar.  In order to provide the best advice for clients, advisors must use all their resources which is in a 640 page text book for the CWPP™ program and in a 300 page text for the for the APP™ program. 

            When a faculty member from the WPI grades the essay exam, it will be readily apparent if an advisor really understands the material learned and is able to be worthy of the CWPP™ or APP™ certification.             

The following is an example essay question and answer.

Example test question and answer.

 

Facts: Dr. Smith is a male, age 32, married with no children.  His spouse is a grade school teacher.  Dr. Smith has gross income of $350,000 a year from his solo practice (sole proprietor), and works as a pain management physician.  He has an office which he leases and one employee.  He has a fully insured health plan with Blue Cross.  He has $5,000 per month in disability insurance and no life insurance. The couple just purchased a $500,000 house with a $460,000 mortgage.  The couple has no brokerage account, no retirement plan and no investment real estate.    Please point out the potential problems Dr. Smith has, the potential solutions to those problems and your recommendation.

 

Problems: Dr. Smith;

 

1) has no life insurance

2) has too little DI.

3) is a sole proprietor

4) has a fully insured health insurance plan

5) has no qualified retirement plan or other supplemental program to build wealth in a tax favorable manner.

 

Potential solutions: Dr. Smith should;

 

1) Purchase life insurance of at least $1,000,000.  He could purchase term, UL, EIUL, WL or Variable.

2 go to the primary market and purchase more DI.

3) immediately incorporate to lessen his liability and potentially give him the opportunity to take “distributions” from his company to lessen his taxes.

4) consider a high deductible health insurance plan.

5) implement a qualified retirement plan (which could range from a 401k/profit sharing plans to a money purchase to a SEP or SIMPLE IRA).  In addition, Dr. Smith should consider using a plan such as WealthBuilder Annuity to reduce his current income and taxes and build wealth in a tax favorable manner for use in the future.

 

Recommendation:

 

1) Unless Dr. Smith, after discussions, had a strong need for “permanent” life insurance, I would recommend that he purchase at least $1,000,000 of 20-30 year term life.  At his age, return of premium term life would work well and would be financially appealing to the client. 

 

2) Dr. Smith earns enough money to purchase at least another $5,000 per month   of DI.  I would recommend that he purchase as much additional DI as possible.  At his age, the price will never be less expensive.

 

3) I would recommend that Dr. Smith immediately incorporate and become a P.C. or LLC (depending on what his state allows).  I would recommend that the entity be treated as an S-Corporation for tax purposes.

 

4) Assuming Dr. Smith and his wife are healthy; I would recommend that they purchase a Health Saving Account (high deductible) health insurance plan.  If the employee is a full time employee, Dr. Smith could purchase it through the office as a deductible expense and the premium for the one employee would be very low. 

 

5) I would recommend that Dr. Smith implement a simple 401k/profit sharing and I would recommend that he max out his contribution. Because he only has one employee the amount of money contributed for the employee will be low. 

 

In addition, I would recommend that Dr. Smith implement WealthBuilder Annuity in the amount of $50,000.  He could implement the plan this year and if things did not go as planned, he would not be required to make any future contributions.  I would recommend that Dr. Smith set up the installment payment from WBA to start paying when he turns age 55, and I would have it pay over a 10 year period (this would help Dr. Smith have the option of slowing down or retiring before age 59 ˝.

 
 
 

© 2017 The Wealth Preservation Institute • St. Joseph , MI • (269) 216-9978