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FA 201 Flashcards

1
Q

Harrison is examining the prospect’s financial statements, identifying obstacles to desired goals, and looking at possible alternatives to meet insurance needs. Which of the following steps of the selling/planning process will Harrison likely do next?

gather information and establish goals

analyze the information

develop and present the plan

implement the plan

A

develop and present the plan

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2
Q

Which of the following persons is a client for the advisor, Mary Soto.

Albert, who lives in the same apartment complex as Mary

Barbara, who purchased a product from Mary yesterday

Charles, who has not purchased a product from Mary but refers business to her

Denise, who bought a second product from Mary today and gave her some referrals

A

Denise, who bought a second product from Mary today and gave her some referrals

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3
Q

Which of the following statements regarding conducting market surveys is correct?

Due to their relative ease, you should conduct market surveys on every potential target market.

A market survey can help evaluate the competition’s marketing efforts within a target market.

You should plan to ask anywhere between 15 and 20 questions.

A market survey should only be used with members of the potential target market.

A

A market survey can help evaluate the competition’s marketing efforts within a target market.

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4
Q

Brad would like to segment his market using variables such as age, gender, income, and occupation. Which type of segmentation variable is Brad using?

demographic

psychographic

geographic

behavioristic

A

demographic

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5
Q

Which of the following statements regarding positioning your personal brand and products is correct?

A positioning statement is designed to be used with your prospects.

A value proposition defines the value of a target market to an agent in dollars and cents.

Public image is composed of all the characteristics that make an advisor recognizable and memorable.

Preapproach involves creating awareness of your personal brand.

A

Public image is composed of all the characteristics that make an advisor recognizable and memorable.

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6
Q

Which of the following statements regarding positioning your personal brand and products is (are) correct?
I. Define your position based solely on your skills and resources, and not on the competition’s position.
II. Create a positioning statement that you will use in your interaction with prospects.

I only

II only

Both I and II

Neither I nor II

A

Neither I nor II

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7
Q

Positioning a product should accomplish which of the following objectives?
I. It should help prospects see their financial needs clearly.
II. It should provide a general sense of the cost of doing nothing compared to the cost of addressing one’s needs.

I only

II only

Both I and II

Neither I nor II

A

Both I and II

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8
Q

Which of the following statements uses emotion to influence the prospect to consider buying disability income insurance?
I. “Statistics show that someone your age has a higher probability of becoming disabled than dying before age 65.”
II. “You have life insurance if you die. Let’s consider the impact that disability, or what many call ‘living death,’ will have on your family’s standard of living.”

I only

II only

Both I and II

Neither I nor II

A

II only

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9
Q

Which of the following prospecting sources uses centers of influence (COIs) to identify prospects?
I. people who know you favorably
II. people recommended by those who know you favorably

I only

II only

Both I and II

Neither I nor II

A

II only

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10
Q

Mike wants to penetrate a target market of strangers that do not know him or those who know him favorably. Which of the following prospecting methods would be appropriate for him to use?
I. personal interaction
II. personal recommendations

I only

II only

Both I and II

Neither I nor II

A

I only

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11
Q

All of the following are prospecting methods that are typically used to prospect within your current client base EXCEPT

seminars

third-party lists

service transactions

financial reviews

A

third-party lists

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12
Q

All of the following statements regarding identifying market segments and creating profiles are correct EXCEPT

Examine the segmentation variables that would indicate that a client belongs to a group with a networking system.

It is important to consider the quantity and quality of referrals.

Note the common characteristics of clients who bought a product for the same reasons.

The level of compensation from clients is the only factor that should be considered when evaluating the ability to generate profits.

A

The level of compensation from clients is the only factor that should be considered when evaluating the ability to generate profits.

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13
Q

All of the following are steps in the eight-step marketing/planning process EXCEPT

gathering information and establishing goals

implementing the plan

approaching the prospect

positioning the product

A

positioning the product

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14
Q

All of the following are criteria of a target market EXCEPT

The group is large enough to provide a continual flow of prospects.

Members have common characteristics that distinguish them from nonmembers.

The advisor has a natural affinity for or access to the group.

The group shares information through a communication or networking system.

A

The advisor has a natural affinity for or access to the group

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15
Q

All of the following are advantages of target marketing EXCEPT

It guarantees that an advisor will not need to prospect in other ways.

The advisor can tailor post-sale service strategies to build deeper relationships.

It enhances an advisor’s referability due to the target market’s communication network.

The advisor gains a reputation within a target market for being an expert.

A

It guarantees that an advisor will not need to prospect in other ways.

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16
Q

Which of the following statements regarding conducting an effective seminar is correct?

A newspaper advertisement is the most cost-effective way to announce the seminar.

Seminars are used solely as a preapproach.

Use a feedback form to gather attendees’ contact information and responses to the seminar.

Even with a seminar, you will need to conduct an initial interview with each attendee who agrees to meet with you.

A

Use a feedback form to gather attendees’ contact information and responses to the seminar.

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17
Q

Which of the followings advisors is following the do-not-call rules correctly?

Alan contacts all of his referrals after the referrer has contacted them.

Beth calls prospects on Saturday mornings at 7:30 a.m.

Charles calls his friends without receiving their written permission to do so.

Diane blocks the use of caller identification when she calls a prospect.

A

Charles calls his friends without receiving their written permission to do so.

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18
Q

Levon is calling prospects from a direct mail list who are members of the mature adult life-cycle segment. Which of the following represents an approach for completing the “creating interest” step of the telephone approach?
I. “The reason I’m calling is to follow up on the letter I sent you about preparing for retirement. Most people do not understand the limitations of Social Security and pension benefits and the pitfalls that can arise if one relies solely on them.”
II. “The article I sent you talks about common concerns people have when planning for retirement: saving enough money for retirement, outliving their assets, paying for care when they can no longer care for themselves, and leaving a legacy. Which of these reflects how you feel? Or, is there some other concern not listed?”

A

Both I and II

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19
Q

Which of the following statements regarding writing a preapproach letter is (are) correct?
I. Attempt to write something that grabs the prospect’s attention.
II. Your letters should include many statistics to enhance your credibility.

A

I only

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20
Q

Roger, a long-term-care insurance agent, wants to target market seniors. Which of the following advertising ideas would be appropriate for Roger to consider?
I. sponsoring events at the recreation center of an over-55 community
II. advertising on a local radio station with a rap music format

A

I only

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21
Q

Which of the following statements regarding how to handle caller identification and voice mail is (are) correct?
I. Never leave a message on a prospect’s voice mail, and keep calling until the prospect answers.
II. The only solution for handling caller identification is to avoid cold calls.

A

II only

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22
Q

Which of the following statements regarding the marketing importance of people’s life events is (are) correct?
I. Life events inherently create or increase a prospect’s need and/or ability to pay for financial products.
II. Life events often trigger a prospect’s awareness of financial needs and/or increase interest in addressing them.

A

Both I and II

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23
Q

All of the following statements regarding life events are correct EXCEPT

Life events are often useful as triggers that raise awareness of resulting financial needs.

Life events are important occurrences in people’s lives that often result in substantial changes in their lives.

Many life events inherently create or increase a prospect’s need and/or ability to pay for financial products or services.

Life events have not been affected by changes in society and will always occur in the same order and timing as they have in the past.

A

Life events have not been affected by changes in society and will always occur in the same order and timing as they have in the past.

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24
Q

All of the following are incidental advantages of using preapproach letters EXCEPT

They create awareness of possible financial needs that prospects should address.

Sending a definite number of letters on a regular basis can help establish the discipline of making regular weekly calls.

They relieve some of the pressure of the call because the prospect has seen your name at least once.

Letters with tear-off response cards act as both a preapproach and an approach.

A

Letters with tear-off response cards act as both a preapproach and an approach.

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25
Q

All of the following prestige-building methods require some level of skill EXCEPT

community involvement

writing

speaking to groups

hosting a radio show

A

community involvement

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26
Q

All of the following statements regarding community involvement are correct EXCEPT

The easiest level of involvement in terms of time and energy is sponsorship and giving.

Volunteering requires a tremendous amount of time and should be undertaken with great caution.

Joining an organization allows people in the organization to discover your talents, your values, and your character.

Leading is an opportunity to showcase your talents and abilities without uttering one word of self-promotion.

A

Volunteering requires a tremendous amount of time and should be undertaken with great caution.

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27
Q

All of the following statements regarding personal brochures are correct EXCEPT

Personal brochures should include standard information, such as contact information and products offered.

You should always avoid disclosing personal information such as hobbies and interests.

You should design the personal brochure around your value proposition.

You should describe, when possible, the benefits that your credentials and experience offer to the prospect.

A

You should always avoid disclosing personal information such as hobbies and interests.

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28
Q

All of the following statements regarding seminars are correct EXCEPT

The date and time are critical.

The site you select for the seminar should be convenient for members of your target market.

If you are not a good public speaker, you should avoid using seminars in your business.

Plan to use a feedback mechanism such as an evaluation form.

A

If you are not a good public speaker, you should avoid using seminars in your business.

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29
Q

The minimum emergency fund normally recommended should cover living expenses for

1 to 2 months

3 to 6 months

6 to 12 months

1 to 2 years

A

3 to 6 months

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30
Q

Disability income plans that have a cost-of-living adjustment rider (COLA) will provide an adjustment to the base amount of coverage to reflect change due to inflation

at the end of the claim period

only for successive claims

only as a flat percentage of the base amount

usually after an insured has been disabled for 12 months

A

usually after an insured has been disabled for 12 months

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31
Q

Chris would like a disability income policy for which premiums cannot be changed. Which type of policy should his advisor tell him to buy?

noncancelable

optionally renewable

guaranteed renewable

permanent

A

noncancelable

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32
Q

Which of the following is the first step in establishing a budget?

Instruct the prospect to balance their income and expenses to allow for allocation of funds.

Instruct the prospect to clear debts, pay off bills, and control spending.

Estimate the prospect’s anticipated total income.

Estimate the prospect’s fixed, discretionary, and special-consideration expenses.

A

Estimate the prospect’s anticipated total income.

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33
Q

Which of the following best describes the unrestricted own-occupation definition of disability?

the inability to perform the duties of any occupation

the inability to perform the substantial and material duties of one’s regular occupation

the inability to work in any occupation for which one is reasonably suited by education, training, or experience

the inability to do some of the specific duties relating to a job or profession

A

the inability to perform the substantial and material duties of one’s regular occupation

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34
Q

Which of the following statements concerning personal financial alternatives when a worker becomes disabled is (are) correct?
I. Most workers will be able to use their emergency funds (savings) to get through a period of disability.
II. For most workers, Social Security disability income payments will be enough to cover their period of disability.

A

Neither I nor II

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35
Q

Donald notices that his prospects often have sticker shock when they see the premiums for the disability income insurance solutions he presents. Which of the following would be a way to remedy this problem?
I. He could obtain a commitment from prospects regarding the amount they can afford to pay.
II. He could show the prospects a plan with a longer elimination period and shorter benefit period.

A

Both I and II

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36
Q

Which of the following statements concerning disability income insurance is (are) correct?
I. The “any-occupation” definition of disability is the most liberal definition for an insured.
II. The definition of disability can vary greatly from one policy to another.

A

II only

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37
Q

Which of the following prospects will most likely have the characteristics of having no constraints, a feeling of immortality, and high debt?
I. Maria, a 22-year-old single woman who just graduated from college
II. Miguel and Bonita, a 35-year-old married couple with two young children

A

I only

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38
Q

Which of the following statements about life insurance planning is (are) correct?
I. Life insurance can help solve many of the financial problems facing the survivors of a deceased insured.
II. Life insurance creates an “immediate estate” with money that did not previously exist.

A

Both I and II

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39
Q

Sheila is working with a young family in which one of the parents is a homemaker. Which of the following statements regarding the family’s life insurance needs is (are) correct?
I. No insurance is needed on the homemaker who does not earn any income.
II. The family probably will need to replace the lost income of the wage earner.

A

II only

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40
Q

All of the following are basic financial objectives that most people need to address at some point during the life cycle EXCEPT

protecting against risk

providing for financial security

developing a comfortable retirement

reducing the effects of federal estate taxes on their estates

A

reducing the effects of federal estate taxes on their estates

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41
Q

All of the following young-adult subsegments probably have an income replacement need EXCEPT

singles

dual-income no kids

single-income young families

dual-income young families

A

singles

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42
Q

All of the following probably have a need for disability income insurance, assuming they do not have any employer-sponsored coverage, EXCEPT

Lane, a 25-year-old nurse

Wayne, a 62-year-old union retiree

Shane, a 40-year-old electrician who is married with a young family

Dane, a 55-year-old businessowner

A

Wayne, a 62-year-old union retiree

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43
Q

Universal financial needs for a family include all of the following EXCEPT

protection against loss in the event of dying too soon

protection against the loss of income in the event of disability

protection against personal property loss and personal liability claims

funds to pay federal estate taxes

A

funds to pay federal estate taxes

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44
Q

Which of the following statements regarding ordinary life insurance is correct?

If it is a 2001 CSO policy, it will mature at age 110.

At maturity the cash value equals the face amount of the original policy.

If the insured lives to the maturity date, the proceeds are paid to the beneficiary.

The net amount at risk is the difference between the face amount and the premium.

A

At maturity the cash value equals the face amount of the original policy.

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45
Q

Robert purchased a $100,000 whole life policy in 1995. In 2012, he surrendered the policy for its cash value of $50,000. At that time, Robert had paid $45,000 in premiums and had received dividends of $10,000. What were the federal income tax consequences upon receipt of the cash surrender value?

Robert received the entire $50,000 tax-free.

Robert received $45,000 tax-free and $5,000 as ordinary income.

Robert received $35,000 tax-free and $15,000 as ordinary income.

Robert received $15,000 tax-free and $35,000 as ordinary income.

A

Robert received $35,000 tax-free and $15,000 as ordinary income.

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46
Q

In the middle years, some parents are taking care of their children as well as their aging parents. This phenomenon is known as

the middle generation

the multilevel generation

the sandwich generation

the silent generation

A

the sandwich generation

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47
Q

Mary Hobbes is divorced. She will reach full retirement age this year. She will be eligible to receive Social Security retirement benefits under her former spouse’s earnings record only if

the other covered spouse dies or becomes disabled.

the marriage lasted 10 years or longer.

the divorce decree includes a qualified domestic-relations order.

the marriage lasted fewer than 15 years.

A

the marriage lasted 10 years or longer.

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48
Q

Which of the following is (are) characteristic of universal life insurance?
I. Face amounts under this plan can be increased with additional underwriting approval.
II. Premiums are fixed and inflexible except by formal adjustments approved by the insurer.

A

I only

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49
Q

Monica would like to sell variable life insurance in the state of Pennsylvania. Which of the following would she need to do?
I. obtain a life insurance license in the state of Pennsylvania
II. register with the Financial Industry Regulation Authority (FINRA) and state securities regulators

A

Both I and II

50
Q

Patricia owns a $50,000 whole life policy that is not a Modified Endowment Contract (MEC). The contract has a surrender value of $25,000. Patricia has a cost basis of $15,000. Which of the following statements regarding taxation of policy benefits is (are) correct for Patricia?
I. A loan would be taxable up to $10,000, the amount of gain in the policy.
II. A portion of the death benefit, $35,000, would be taxable to the beneficiary.

A

Neither I nor II

51
Q

Which of the following statements is (are) correct regarding planning implications for two unrelated adults who are living together but are not married?
I. An unmarried partner automatically inherits all or a portion of the deceased partner’s estate.
II. You can encourage them to create a will to handle the transfer of property at death.

A

II only

52
Q

All of the following are common characteristics of the middle-years adults segment EXCEPT

many have aging parents

some will experience an “empty nest”

most have little or no concern about retirement

most are established in their careers

A

most have little or no concern about retirement

53
Q

All of the following are common characteristics you may encounter when working in Asian American markets EXCEPT

Education is very important to Asian American communities.

Honor and saving face are values.

One’s parents and elders are held in high regard in general.

Asian Americans have a cultural predisposition to buy term insurance.

A

Asian Americans have a cultural predisposition to buy term insurance.

54
Q

All of the following types of life insurance are considered traditional policies EXCEPT

whole life

annual renewable term

limited-pay life

universal life

A

universal life

55
Q

Premiums are deductible in all of the following situations EXCEPT

a policy paid by the insured where a charity is the owner and beneficiary

a policy that an uncle takes out on his nephew

a policy that is part of a qualified retirement plan

a policy that is part of alimony in a divorce decree

A

a policy that an uncle takes out on his nephew

56
Q

All of the following are true about the women’s market EXCEPT

Women now represent over 50 percent of all college undergraduates.

The number of women business owners has fallen sharply in recent years.

Women want flexibility at work because they are still the primary caregivers for both children and elderly parents.

More women are waiting longer to marry in order to focus on their careers.

A

The number of women business owners has fallen sharply in recent years.

57
Q

All of the following are typical characteristics of women buyers EXCEPT

Women usually have a longer buying cycle.

Women do more research and seek more advice.

The female value shopper has replaced the stereotypical female bargain shopper.

Women rarely choose to work with a financial advisor

A

Women rarely choose to work with a financial advisor

58
Q

All of the following statements concerning alimony and child-support payments are correct EXCEPT

Child-support payments are tax deductible to the party making them.

Alimony payments are taxable income to the recipient.

Child-support payments are nontaxable to the recipient.

Alimony payments are tax deductible to the party making them.

A

Child-support payments are tax deductible to the party making them.

59
Q

The effect of interest on a sum of money accumulating over time is known as the

cost of waiting

time value of money

multiplier effect

risk/return ratio

A

time value of money

60
Q

Jennifer is advising a 55-year-old prospect who wants to retire early. In order to do so, the prospect will need to withdraw monies from her traditional IRA. Jennifer should tell the prospect to delay retirement until which of the following ages to avoid the IRS 10 percent penalty tax on early withdrawals?

59½

60

65

70½

A

59½

61
Q

A stock mutual fund is an investment vehicle that provides which set of advantages?

professional management, diversification, short-term

diversification, dollar-cost averaging, short-term

professional management, diversification, dollar-cost averaging

diversification, cash equivalents, liquidity

A

professional management, diversification, dollar-cost averaging

62
Q

Connie will meet with an employee of a local 501(c)(3) charity to discuss retirement planning. Which special type of retirement plan might she encounter that she would not encounter in working with employees of for-profit companies?

529 Plan

Roth IRA

403(b)

401(k)

A

403(b)

63
Q

The current retirement gap is the

difference between the existing resources and the retirement income need

percentage of current income needed for retirement

difference between tomorrow’s resources and today’s needs

state of well-being in retirement and the dollar amount it will take to live that way.

A

difference between the existing resources and the retirement income need

64
Q

Which of the following statements about the current retirement gap is (are) correct?
I. The current expenses calculation should not include such items as planned vacations, vehicle purchases, and planned gifts.
II. Current resources should include estimated Social Security and employer-sponsored retirement benefits.

A

II only

65
Q

Howard’s prospect wants to avoid federal, state, and local income taxes. Which of the following investments may enable the prospect to accomplish this objective?
I. Treasury bonds
II. municipal bonds from an issuer located within the prospect’s state

A

II only

66
Q

Which of the following statements concerning annuities is (are) correct?
I. An annuity can provide guaranteed lifetime income to the annuitant.
II. Annuities may impose surrender charges in the first few years of the contract.

A

Both I and II

67
Q

Ingrid, a 55-year-old client, owns a deferred life annuity that is worth $30,000. She has paid $20,000 in premiums. Ingrid wants to withdraw $10,000 out of the annuity to pay off some credit card debt.
I. The $10,000 she withdraws will be taxable income.
II. A 10 percent penalty tax will apply to the $10,000 withdrawal.

A

Both I and II

68
Q

Juan indicates to his advisor that he wants to buy some tangible assets. Which of the following investments would fall into this category?
I. collectibles
II. commodities

A

Both I and II

69
Q

All of the following would be prospects for a deductible IRA or a deductible spousal IRA EXCEPT

Diane and Donald, whose MAGI is $70,000 per year and whose employers offer defined-benefit plans

Maria, whose spouse does not work outside the home

Charlene and Chuck, whose MAGI is $500,000 per year and whose employers offer defined-benefit plans

Karla, whose employer does not sponsor a retirement plan

A

Charlene and Chuck, whose MAGI is $500,000 per year and whose employers offer defined-benefit plans

70
Q

All of the following statements concerning annuities are correct EXCEPT

A major advantage of annuities is tax-deferred growth of assets.

Indexed annuities provide direct investments into mutual funds.

Advisors must have a securities registration with FINRA to sell variable annuities.

Annuities may be purchased with a single payment or premium.

A

Indexed annuities provide direct investments into mutual funds.

71
Q

All of the following are examples of types of investment funds that hold equities EXCEPT

balanced funds

income funds

money market funds

high-yield income funds

A

money market funds

72
Q

To qualify for tax-deferred status, all tax-qualified retirement plans must conform to all of the following EXCEPT

meet minimum vesting requirements

meet minimum and maximum funding standards

meet minimum participation and coverage requirements

guarantee retirement benefits

A

guarantee retirement benefits

73
Q

Tax-qualified retirement plans include all of the following EXCEPT

defined-benefit retirement plans

profit-sharing plans

individual retirement accounts (IRAs)

401(k) plans

A

individual retirement accounts (IRAs)

74
Q

Medicare Part A is available without premium to

any retired person

people who meet the means test

Social Security recipients at age 65 or older

Social Security recipients at age 62 or older

A

Social Security recipients at age 65 or older

75
Q

Which of the following services is covered by Medicare Part A?

inpatient hospital care

physician services

durable medical equipment

outpatient hospital services

A

inpatient hospital care

76
Q

Albert, Barbara, Charles, and Diane own long-term-care insurance policies with the same insurer. The policies were written under the LTC partnership program. Which of the following four friends has experienced an event that will trigger benefits?

Albert, who moves into an over-55 housing unit

Barbara, who receives her first Social Security retirement benefit check

Charles, who is hospitalized with a life-threatening ailment or disease

Diane, whose physician certifies that she can no longer perform several activities of daily living (ADLs)

A

Diane, whose physician certifies that she can no longer perform several activities of daily living (ADLs)

77
Q

Dan owns a long-term-care indemnity policy with a daily benefit of $250. The actual cost of long-term care is $200 per day. Which of the following is the amount Dan’s policy will pay for care?

$50 per day

$200 per day

$250 per day

$450 per day

A

$250 per day

78
Q

Long-term care policies that pay a specified amount per day regardless of actual costs incurred for care pay benefits on

a reimbursement basis

an indemnity basis

a facility-only basis

a maximum-daily-benefit basis

A

an indemnity basis

79
Q

Howard wants to write a preapproach letter to the mature-adults life-cycle segment. Which of the following pieces of information would make sense to include in the letter?
I. The National Clearinghouse for Long-term Care Information estimates that 70 percent of people age 65 or older will spend some time in a nursing home before they die.
II. The accelerating need for care will drive up the future costs of long-term care due to the basic economic law of supply and demand.

A

Both I and II

80
Q

Which of the following statements concerning Medicare is (are) correct?
I. Medicare covers most long-term custodial care costs.
II. Medicare covers persons over the age of 65 who are eligible for Social Security retirement benefits.

A

II only

81
Q

Which of the following statements regarding Medicare coverage is (are) correct?
I. Medicare Part A covers hospital insurance.
II. Medicare Part B covers medical and surgical outpatient service and
diagnostic tests.

A

Both I and II

82
Q

Which of the following statements regarding Medicare Part D coverage for prescription drugs is (are) correct?
I. Medicare prescription drug coverage is available only to those who are enrolled in the original Medicare program.
II. The program provides coverage of 100 percent of prescription drug expenses up to a limit known as the doughnut hole.

A

Neither I nor II

83
Q

Marie wants to conduct a seminar for prospects in the mature-adult life-cycle segment. Which of the following would be a possible topic?
I. paying for health care in retirement
II. mistakes seniors make in retirement

A

Both I and II

84
Q

All of the following are included in every Medicare supplement insurance policy EXCEPT

payment for the first three pints of blood

payment of the coinsurance for Medicare-approved Part B charges for physicians’ and medical services

payment for the annual Part B deductible

coinsurance for Medicare-approved out-patient treatment after the deductible

A

payment for the annual Part B deductible

85
Q

All of the following are services that may be covered under Medicare Part B EXCEPT

physician’s and surgeon’s care

X-rays and other diagnostic services

durable medical equipment

psychiatric hospital care

A

psychiatric hospital care

86
Q

All of the following are common characteristics of mature adults EXCEPT

They are concerned about accumulating assets and not outliving their resources.

They are concerned about health care needs and affordability of such care if needed.

They have more time and are concerned about safety and reduced risk.

They are more carefree and less deliberate since they are retired and relaxed.

A

They are more carefree and less deliberate since they are retired and relaxed.

87
Q

All of the following statements regarding increasing retirement income are correct EXCEPT

Due to increased longevity, most seniors need to take more investment risk and purchase hedge funds and commodities.

Annuities can provide a source of guaranteed income that cannot be outlived.

Life insurance can be used to replace income lost at the death of a working spouse or to replace pension payments.

Reverse mortgages allow seniors to tap the equity from their homes while still living in them.

A

Due to increased longevity, most seniors need to take more investment risk and purchase hedge funds and commodities.

88
Q

All of the following are activities of daily living used to trigger long-term care insurance benefits EXCEPT

bathing

dressing

transferring

cooking meals

A

cooking meals

89
Q

A financial services client is

any customer who has purchased a financial product or service from you

any person who has a strong interpersonal relationship with you

any customer who has given you a referral

a customer who follows your advice consistently, buys from you again, and refers you to others

A

a customer who follows your advice consistently, buys from you again, and refers you to others

90
Q

What is the purpose of classifying your customers or policyowners?

You seek to create more service work.

You want to spend the most time with those people who generate the most revenue.

You need to provide this information to federal regulators.

You want to notify each customer or policyowner of their classification.

A

You want to spend the most time with those people who generate the most revenue.

91
Q

John’s company is sending a letter to all of his clients notifying them of a tax-law change that will affect them adversely. Which of the following would be the wisest course of action for him to take?

Prepare to respond only to those clients who call after they receive the letter.

Follow up the letter immediately with phone calls offering to meet with clients to discuss the changes.

Send an apology letter to all clients affected by the change.

Refer all client questions regarding the matter to his company

A

Follow up the letter immediately with phone calls offering to meet with clients to discuss the changes.

92
Q

Which of the following statements regarding the regulation of insurance companies is correct?

Ethical codes are created and enforced by state regulatory bodies.

Advertising is regulated by federal law only.

Producers must be registered with the Financial Regulatory Authority (FINRA) to sell any insurance products.

Producers legally may hold a license from more than one state.

A

Producers legally may hold a license from more than one state.

93
Q

Which of the following customers would potentially make an excellent client?
I. Maureen, a new customer who has already referred to you two people who bought products.
II. Rick, a customer who requires a lot of hand-holding and maintenance.

A

I only

94
Q

Which of the following statements regarding strategies for how you will market is (are) correct?
I. Prestige-building methods include writing books and advertising.
II. Creating approach scripts is a task associated with strategizing how to market.

A

Both I and II

95
Q

Selena is struggling to convert suspects to prospects. Which of the following aspects of marketing would be logical to examine for possible deficiencies?
I. the quality of her leads
II. her prestige-building strategies

A

Both I and II

96
Q

Rafael wrote a life insurance application on Gloria Jones. He told Ms. Jones that the application would take two weeks. Unfortunately, underwriting has ordered medical records, and the process will take at least another two weeks. Which of the following should Rafael do?
I. He should contact Ms. Jones immediately and inform her of the delay.
II. He should remain actively involved throughout the underwriting process.

A

Both I and II

97
Q

Which of the following statements regarding unauthorized entities is (are) correct?
I. An unauthorized entity is an insurance company that has not gained approval to place insurance in a jurisdiction where it wants to sell.
II. An unauthorized entity is prohibited from doing business in a state in which it is unlicensed.

A

Both I and II

98
Q

Which of the following statements concerning compliance and ethics is (are) correct?
I. Ethics is a code of behavior concerning right and wrong, embraced in a code of ethics.
II. If an advisor follows all company rules and regulations, his or her ethical behavior will be assured.

A

I only

99
Q

All of the following are tasks to be completed in preparing for the delivery of a financial product EXCEPT

Manage the issuance process.

Call for an appointment.

Add backup information.

Include any required information.

A

Manage the issuance process.

100
Q

All of the following statements regarding a marketing funnel are correct EXCEPT

A marketing funnel is used to calculate the activity goals needed to achieve your income goal.

The marketing funnel uses previous year’s data for activities such as phone calls, contacts, appointments set, and so on.

Prospecting-and-sales-effectiveness ratios are quantitative measures of an advisor’s effectiveness in performing key sequential prospecting and sales activities.

The activity goals are calculated by using last year’s prospecting-and-sales effectiveness ratios and working forwards or down the funnel.

A

The activity goals are calculated by using last year’s prospecting-and-sales effectiveness ratios and working forwards or down the funnel.

101
Q

All of the following are objectives of the delivery interview EXCEPT

reinforcing the buying decision

obtaining a premium commitment

offering another opportunity to obtain referred leads

building trust and set expectations for future service and repeat sales

A

obtaining a premium commitment

102
Q

All of the following are objectives of monitoring and servicing customers EXCEPT

facilitating customer retention

making repeat sales to customers

improving web-based lead generation programs

obtaining referrals to new prospects

A

improving web-based lead generation programs

103
Q

A properly conducted policy or contract delivery can accomplish all of the following EXCEPT

offer another opportunity to obtain referred leads

set expectations for future service

reinforce the sale by reemphasizing the objectives behind the purchase

provide an opportunity to close the sale

A

provide an opportunity to close the sale

104
Q

Which of the following statements concerning the federal gift tax is correct?

Federal gift taxes are paid by the recipient of the gift.

Any person can give an amount up to the annual gift tax exclusion to any other person with no federal gift tax imposed.

Federal gift tax rules are not related to the federal estate tax rules.

Any person may make unlimited gifts to any other individual during the donor’s lifetime without federal gift taxes being imposed.

A

Any person can give an amount up to the annual gift tax exclusion to any other person with no federal gift tax imposed.

105
Q

Which of the following statements about how property transfers at death is correct?

If the deceased has no will, the property will always go to a spouse or nearest of kin.

The deceased’s property will pass by contract only if there is no will in effect.

Advisors should recommend that clients have a valid will or other arrangement to ensure an orderly disposition of assets upon death.

The provisions of a deceased’s will take precedence over beneficiary designations such as those in a life insurance policy.

A

Advisors should recommend that clients have a valid will or other arrangement to ensure an orderly disposition of assets upon death.

106
Q

In which of the following situations would John’s life insurance proceeds not be includible in his estate?

He owns the policy and his daughters are the named beneficiaries.

The policy is payable to the executor of John’s estate.

The policy is owned from inception by Mary, his wife.

The policy he owns is classified as a MEC.

A

The policy is owned from inception by Mary, his wife.

107
Q

A married couple, Igor and Maria, have individual estates of $10 million each. Their wills provide that the surviving spouse inherit the deceased’s estate. At the death of the surviving spouse, all of the monies are donated to a public charity. Which of the following assumptions would their advisor be justified in making?

Estate tax would be due at the death of the first spouse on the portion of the estate that exceeds the exemption equivalent.

No estate tax would be due at the death of the second spouse because of the applicable credit amount and the charitable deduction.

No estate tax would be due at the death of the first spouse because of the applicable credit amount.

Estate tax would be due at the death of the second spouse, but only on the amount of the estate that exceeds twice the exemption equivalent.

A

No estate tax would be due at the death of the second spouse because of the applicable credit amount and the charitable deduction.

108
Q

Which of the following gifts made by Cal would fully qualify under the annual gift-tax exclusion and not result in any gift tax?

the $10,000 in stock that he gave his brother

the $25,000 in cash that he gave his daughter

the $35,000 car he gave his son

the $5,000 he puts in a revocable trust for his grandson

A

the $10,000 in stock that he gave his brother

109
Q

Which of the following statements regarding the old-age adults market segment is correct?

Aging has no effect on someone’s ability to transfer information from short-term to long-term memory.

One of the biggest concerns for many people in this market segment is investment growth.

It is important to recognize that members of the old-age market segment have difficulty learning and are slow to understand new concepts.

Some members of the old-age market segment will want to leave a legacy to children and/or grandchildren.

A

Some members of the old-age market segment will want to leave a legacy to children and/or grandchildren.

110
Q

Which of the following statements concerning estate planning is (are) correct?
I. Estate planning encompasses the accumulation, conservation, and distribution of an estate.
II. The major objective of estate planning should be to minimize estate taxes.

A

I only

111
Q

Omar and Julia own a house jointly with rights of survivorship. Which of the following would occur should one of them die?
I. The surviving spouse would gain full ownership of the house by operation of law.
II. The transfer of ownership to the surviving spouse would not be a part of the probate process.

A

Both I and II

112
Q

Which of the following statements regarding advanced directives is (are) correct?
I. A living will guarantees that a person’s medical wishes will be followed if he or she becomes terminally ill or is in a vegetative state and unable to communicate.
II. Advanced directives relieve families and friends of the responsibility of making decisions regarding life-prolonging actions.

A

II only

113
Q

Which of the following life insurance settlement options results in lifetime income paid to the beneficiary?
I. life income with refund
II. fixed period income

A

I only

114
Q

All of the following statements regarding death claims are correct EXCEPT

It may be advisable for the beneficiary to leave the proceeds with the company at interest for 6 months or longer to give him or her time to think.

In considering any investment opportunities, your policyowners need to weigh their objectives against such factors as safety of principal, rate of return, and so on.

Information on employee benefits, and veterans and Social Security benefits are appropriate to include in a death-claims kit.

A best practice is to discuss immediately with the family members or beneficiaries the death benefit amount so that they can plan how to use the proceeds.

A

A best practice is to discuss immediately with the family members or beneficiaries the death benefit amount so that they can plan how to use the proceeds.

115
Q

All of the following statements regarding annuities are correct EXCEPT

A fixed annuity specifies a minimum guaranteed interest rate.

With a deferred annuity, the income payments are deferred for a period longer than one annuity period after the contract’s issue date.

In its most basic form, an annuity is a legally enforceable contract between an individual and an insurance company that can convert assets into an income stream.

A variable annuity provides a limited amount of market exposure based on a market index, such as the S & P 500 stock index.

A

A variable annuity provides a limited amount of market exposure based on a market index, such as the S & P 500 stock index.

116
Q

All of the following statements concerning a revocable living trust are correct EXCEPT

A major advantage of a revocable living trust is that assets in the trust avoid probate upon the death of the trust owner.

Assets within a revocable living trust are protected against Medicaid spend-down requirements if the owner requires care in a nursing home.

The revocable living trust allows the owner to manage the assets in the trust while he or she is alive.

A revocable living trust can reduce or eliminate probate costs.

A

Assets within a revocable living trust are protected against Medicaid spend-down requirements if the owner requires care in a nursing home.

117
Q

All of the following statements regarding a revocable living trust are correct EXCEPT

The grantor can select a trustee based on business acumen, expertise, and trustworthiness.

A living trust enables a person to avoid the public process of probate completely.

Assets in a living trust are not includible in the gross estate.

With a living trust, delays in estate administration can be avoided.

A

Assets in a living trust are not includible in the gross estate.

118
Q

All of the following statements about aging in America are correct EXCEPT

Aging is a highly individual experience that affects different people in different ways.

Social gerontologists distinguish between the “young-old” and the “old-old” segments of our aging population.

You can safely assume that most clients over 60 cannot learn new information very well.

For some older people, an advisor may need to repeat information or speak louder to them.

A

You can safely assume that most clients over 60 cannot learn new information very well.

119
Q

Q
Spencer is about to call a young married couple who are new parents to set an appointment for an initial interview. Which of the following financial needs would be a good basis for an approach?

protecting the family financially from the death of either parent

paying for potential long-term care

protecting property from a lawsuit

rolling over a 401(k) plan to an IRA

A

protecting the family financially from the death of either parent

120
Q

Q
An advisor Abby is a former English teacher who is targeting members of her school district. The teachers do not have meetings regularly except for faculty and union meetings. They have a monthly newsletter to keep them informed. Which of the following represents a prestige-building method that would work for Abby?

advertising on a billboard

writing an article for the newsletter

hosting a radio show

asking for referrals

A

writing an article for the newsletter

fscp 201 (6 decks)

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