Chapter 1 TF

Question 1

Data gathering in the financial planning process typically entails more than asking the client a series of questions in order to fill out a form.

Answer 1

True

Question 2

The advisor’s responsibility in the fifth financial planning domain is to see that the plan is implemented

Answer 2

False. The advisor’s responsibility in the fifth financial planning domain is to ensure the plan is communicated effectively to the client. The sixth planning domain addresses implementation related issues.

Question 3

In its purest form, comprehensive financial planning is done with the managing advisor’s entire compensation consisting of commissions from the sale of financial products.

Answer 3

False. In its purest form, comprehensive financial planning is conducted by the managing advisor on a fee-for-service basis with no part of his or her compensation coming from the sale of financial products.

Question 4

According to the single-purpose approach to financial planning, a life insurance agent who sells key person life insurance to the owner of a small business is engaged in financial planning.

Answer 4

False. A life insurance agent who sells key person life insurance to the owner of a small business is not engaged in financial planning unless he or she uses the financial planning process in working with the client.

Question 5

Every financial plan is developed around information gathered during a fact-finding process.

Answer 5

True. The second financial planning domain requires a financial service professional gather data to develop planning objectives.

Question 6

Part of a financial advisor’s responsibility is to motivate and assist the client in completing all of the steps necessary for full plan implementation.

Answer 6

True

Question 7

In its purest form, comprehensive financial planning is performed for a client over a period of time.

Answer 7

True. Comprehensive financial planning requires multiple engagements, sometimes stretching over months.

Question 8

A comprehensive financial plan should address all of the major planning areas as they relate to the client.

Answer 8

True

Question 9

A comprehensive financial plan should be communicated to the client either orally or in a written report.

Answer 9

False. A comprehensive financial plan should only be communicated to the client in the form of a written report to follow the eighth planning domain and satisfy compliance considerations

Question 10

The phase of the financial life cycle that an individual is currently in strongly influences the priority given to the goals for each of the planning areas.

Answer 10

True

Question 11

There are three distinct phases in an individual’s financial life cycle.

Answer 11

False. There are at least five distinct phases in an individual’s financial life cycle.

Question 12

One result of analyzing the strengths and weaknesses of a client’s present financial status may be the need for the advisor to work with the client to revise the client’s goals and objectives.

Answer 12

True

Question 13

Comprehensive financial planning services were available to most Americans in the middle and upper-middle income brackets more than 50 years ago.

Answer 13

False. It is only in the past 30 to 35 years that comprehensive financial planning services have become available to Americans in the middle and upper-middle income brackets

Question 14

One result of market volatility of the past decade was an increase in the sophistication of planners.

Answer 14

True

Question 15

A survey conducted by the CFP Board in 1999 identified estate planning as the most popular financial planning specialization engaged in by financial planning advisors.

Answer 15

False. The most popular financial planning specialization engaged in by financial planning advisors is investment planning/advice

Question 16

A trend creating opportunities for financial planning advisors is the falling median age of Americans.

Answer 16

False. A trend creating opportunities for financial planning advisors is the rising median age of Americans, which has risen more than 7 years in the past 3 decades and continues to rise as baby boomers face retirement.

Question 17

A trend creating opportunities for financial planning advisors is that financial conditions in the American economy are becoming more stable.

Answer 17

False. A trend creating opportunities for financial planning advisors is the increasing volatility of financial conditions in the American economy.

Question 18

According to a survey conducted by the CFP Board, the main reason people begin financial planning is to build a retirement fund and distribute retirement dollars.

Answer 18

True

Question 19

According to a study of baby boomers, only 10 percent of them will continue to work during retirement.

Answer 19

False. According to a study of baby boomers conducted by Allstate, more than 70 percent of them will continue to work during retirement.

Question 20

An obstacle preventing consumers from gaining control of their financial destinies is their tendency to spend up to or beyond their incomes.

Answer 20

True