Ethics Flashcards
Which of the following must be provided at the onset of a client engagement If a CFP® professional is providing financial advice but not engaging in financial planning?
Descriptions of services and products to be provided
How the CFP® professional and their firm is compensated for providing products and services
Scope of engagement with any limitations and period of time the scope will be in effect
Disclosure of economic benefits for referrals
III only
II and III only
I, II, III and IV
I, II and IV only
The correct answer is D.
See Supplemental Quiz Lecture on subject for explanation. This is found in the Lessons area within Phase 3.
Which of the following satisfies Practice Standard 1 (Understanding the Client’s Personal and Financial Circumstances)?
Obtain quantitative information from the client such as age, dependents and personal financial information.
Obtain qualitative information form the client such as culture, aspirations and values.
Obtain both quantitative and qualitative information from the client and analyze that information.
Obtain both quantitative information from the client and identify goals.
The correct answer is C.
See Supplemental Quiz Lecture on subject for explanation. This is found in the Lessons area within Phase 3.
Jessie is a CFP® professional and is opening his own financial planning practice. Jessie is concerned about minimizing his risk of loss of personal assets resulting from liability associated with his practice. What should Jessie do to minimize his risk of loss of personal assets?
Jessie should provide services using a fiduciary standard of care.
Jessie should periodically review and monitor the client’s financial performance, life events and progress towards goals.
Jessie should purchase a general liability insurance policy and an errors and omissions policy.
Jessie should objectively analyze and evaluate the client’s current financial situation.
I only
I, II, III and IV
I, II and III only
I, II and IV only
The correct answer is D.
See Supplemental Quiz Lecture on subject for explanation. This is found in the Lessons area within Phase 3.
Which of the following is necessary for a CFP® professional affiliated with a state registered investment adviser to disclose to a client when providing financial advice or financial planning services:
You are personally invested in a mutual fund you are recommending.
Your highest degree earned.
A credit card held by the CFP® professional threatening collections.
Client confidentiality policy.
The correct answer is D.
See Supplemental Quiz Lecture on subject for explanation. This is found in the Lessons area within Phase 3.
A prospective client needs extensive estate planning, along with comprehensive financial planning but the CFP® professional does not have experience with estate planning. What should the CFP® professional do?
Disengage the client.
Prepare the estate plan with the help of an estate planning attorney.
Limit the scope of the engagement to just the areas the planner is competent.
Engage the client and make broad estate planning recommendations.
The correct answer is B.
See Supplemental Quiz Lecture on subject for explanation. This is found in the Lessons area within Phase 3.
A married couple, who both work, recently had a baby. Both partners contribute equally to the household. Financial stability and meeting goals requires both partner’s income. What should a CFP® professional recommend after performing the first three required steps found in the practice standards?
Both partners should purchase term life insurance.
Save up 6 months of an emergency fund.
Conduct a thorough evaluation of the couple’s debt management.
Establish and contribute to a 529 savings plan.
The correct answer is A.
See Supplemental Quiz Lecture on subject for explanation. This is found in the Lessons area within Phase 3.
Steve is a CFP® professional and recently met with a prospective client, Jason. Jason is a small business owner. Jason is considering rolling out a comprehensive employee benefits plan to his employees. Which of the following is required to be provided to Jason according to the Code of Ethics and Standards of Conduct?
Recommending an employee benefits plan is considered financial advice, which requires the Steve to act as a fiduciary and furnish a written confidentiality statement at the onset of the engagement and provide a written disclosure of material conflicts of interest.
Recommending an employee benefits plan is considered financial planning, which requires the Steve to act as a fiduciary and furnish a written confidentiality statement at the onset of the engagement and provide a written disclosure of material conflicts of interest.
Steve cannot accept the engagement without gathering comprehensive client data on Jason and the company.
Recommending an employee benefits plan is considered financial advice, which requires the Steve to act as a fiduciary and furnish a written confidentiality statement at the onset of the engagement and provide a written or oral disclosure of material conflicts of interest.
The correct answer is D.
See Supplemental Quiz Lecture on subject for explanation. This is found in the Lessons area within Phase 3.
Joe was referred to Lisa, a CFP® professional. Joe was looking to purchase a personal liability umbrella policy (PLUP). Lisa gathers data from Joe to complete an application to submit to the insurance underwriter. Lisa also explains, in detail, the legal aspects of a PLUP, tax issues, coverage limits, exclusions and annual premiums. What duty of care does Lisa owe Joe, according to the CFP Board of Standard’s Code of Ethics?
Lisa is required to provide product recommendations that are suitable for Joe.
Lisa owes Joe the duty of a fiduciary.
Lisa must place Joe’s interest ahead of her own but does not owe him a fiduciary duty of care.
Lisa is not engaged in the material elements of financial planning and does not owe Joe any duty of care.
The correct answer is B.
See Supplemental Quiz Lecture on subject for explanation. This is found in the Lessons area within Phase 3.
A CFP® Professional introduced a 77 year old financial planning client with net worth of $118M to an individual acquaintance of the planner who renovated and sold single-family homes. The client loaned the acquaintance $150,000. The planner did not provide the client with any written disclosures regarding this investment. The acquaintance defaulted on the loan. Which of the following is correct?
The planner did not exercise sound and objective professional judgment.
The planner did not provide professional services with knowledge and the competence and skill.
The client should have done his own due diligence and the CFP® professional did not violate their obligations to the client.
The client did not experience a material loss, therefor the CFP® professional did not violate their obligation to the client.
I only.
I and II only.
III only.
III and IV only.
The correct answer is B.
See Supplemental Quiz Lecture on subject for explanation. This is found in the Lessons area within Phase 3.
A financial planner must address which of the following in all client financial planning engagements?
A description of methods utilized to calculate a Retirement needs analysis
Estate tax issues
A description of methods utilized to calculate a College funding needs analysis
Advantages and disadvantages of existing client debt.
The correct answer is D.
See Supplemental Quiz Lecture on subject for explanation. This is found in the Lessons area within Phase 3.
