FA 290 Flashcards
Which of the following is the guiding principle of Mill’s Utilitarianism?
(A) Actions are moral insofar as they promote the greatest good for the greatest number.
(B) Actions are moral insofar as they treat people as ends and not as means.
(C) Actions are moral if they align for a given society’s moral standards.
(D) Actions are moral if they are in accord with the virtues.
(A) Actions are moral insofar as they promote the greatest good for the greatest number.
Which of the following is the guiding principle of Kant’s Deontology?
(A) Actions are moral insofar as they promote the greatest good for the greatest number.
(B) Actions are moral insofar as they treat people as ends and not as means.
(C) Actions are moral if they align for a given society’s moral standards.
(D) Actions are moral if they are in accord with the virtues.
(B) Actions are moral insofar as they treat people as ends and not as means.
All of the following are true about compliance EXCEPT:
(A) Under a compliance model, our intentions (why we comply with the rules) are irrelevant.
(B) Under a compliance model, the assumption is that people act in accordance with regulations because they fear punishment.
(C) Compliance is adherence to a particular set of rules designed and enforced by regulators.
(D) Ethics is identical to compliance.
(D) Ethics is identical to compliance.
Which of the following is a sphere that is governed by the virtue of justice:
(A) fear of important damages, especially death
(B) bodily appetites and their pleasure
(C) distribution of limited resources
(D) the planning of one’s life and conduct
(C) distribution of limited resources
All of the following are shared human characteristics EXCEPT:
(A) mortality
(B) marriage
(C) capacity for pleasure and pain
(D) early infant development
(B) marriage
Which of the following is the best definition of psychological egoism?
(A) People always act only to promote their perceived self-interest.
(B) People should only be motivated by a desire to help other people.
(C) People usually choose to be selfish.
(D) People are inherently evil.
(A) People always act only to promote their perceived self-interest.
Which of the following is the guiding principle of Aristotle’s Virtue Ethics?
(A) Actions are moral insofar as they promote the greatest good for the greatest number.
(B) Actions are moral insofar as they treat people as ends and not as means.
(C) Actions are moral if they align for a given society’s moral standards.
(D) Actions are moral if they are in accord with the virtues.
(D) Actions are moral if they are in accord with the virtues.
All of the following are consequences of moral relativism EXCEPT:
(A) The idea of moral progress is called into doubt.
(B) All societies are equally tolerant of other societies’ beliefs.
(C) We could decide whether actions are right or wrong by consulting the standards of our own society.
(D) We could no longer say that the beliefs of other societies were inferior to our own.
(B) All societies are equally tolerant of other societies’ beliefs.
Which of the following is the best definition of “ethical fading”?
(A) when there are more bad people than good people in an organization
(B) the process of stripping the moral characteristics and motivation from an action
(C) renewed commitment to acting ethically
(D) social pressure to violate the rules
(B) the process of stripping the moral characteristics and motivation from an action
Which of the following is the best definition of moral relativism?
(A) Moral values are relative to cultures.
(B) There are certain moral standards that are universally true.
(C) There is no such thing as morality.
(D) Everyone should be tolerant of different moral views.
(A) Moral values are relative to cultures.
According to the text, which of the following offers the best definition of procedural justice?
(A) The most powerful stakeholders get their way.
(B) Every stakeholder receives an equal share of benefits and harms.
(C) All stakeholders are allowed to participate in the determination of issues that impact them.
(D) The outcome is fair even if the process is not just.
(C) All stakeholders are allowed to participate in the determination of issues that impact them.
Which of the following is the best definition of normative power as it is described in the text?
(A) depends on the physical forces of violence or restraint
(B) results from “blackmail” or the possession of a strategic piece of information that the person does not want made public
(C) depends on the deployment of financial or material resources
(D) based on the use of symbolic resources
(D) based on the use of symbolic resources
Identifying stakeholder interests requires us to do which of the following?
(A) think about stakeholder interests from the point of view of the stakeholder
(B) broaden our definition of interest to include nonmaterial interests such as self-respect and autonomy
(C) think imaginatively about who could be harmed or benefitted by our actions
(D) all of the above
(D) all of the above
According to the text, moral behavior is best described as which of the following goods?
(A) Moral behavior is good for itself.
(B) Moral behavior is not good at all.
(C) Moral behavior is good for its consequences.
(D) Moral behavior is good for itself and its consequences.
(D) Moral behavior is good for itself and its consequences.
When we think about the consequences of our actions, which of the following should we keep in mind?
(A) What are the short-term consequences of our actions?
(B) What are the long-term consequences of our actions?
(C) How might ethical standards change and how would these changes affect the moral quality of our actions?
(D) all of the above
(D) all of the above
All of the following are true about stakeholder groups EXCEPT:
(A) Stakeholder groups are continually in flux.
(B) Individuals can only be members of one stakeholder group at a time.
(C) Stakeholders may not always be aware of their own interest.
(D) Stakeholders may disagree with the decision-maker’s interpretation of their interests.
(B) Individuals can only be members of one stakeholder group at a time.
Which of the following is not a step in the decision-making model presented in the text?
(A) Check your intentions.
(B) Ask your mentor for advice.
(C) Consider the symbolic potential of the action.
(D) Determine the relevant stakeholders and how they will be impacted.
(B) Ask your mentor for advice.
Which of the following is NOT included in the four categories of information:
(A) known knowns
(B) known unknowns
(C) too hard to know
(D) unknown unknowns
(C) too hard to know
An “unknown unknown” is a piece of information that is best described as which of the following?
(A) information that we don’t know we don’t know
(B) information that we know confidently
(C) information we received from a dubious source
(D) information we know that we do not have
(A) information that we don’t know we don’t know
Which of the following is assessed by so-called “publicity tests”?
(A) whether you are willing to demonstrate to others that your action is in alignment with your values
(B) whether you seek publicity at the expense of your personal relationships
(C) whether you are willing to speak to the media about your personal ethics
(D) whether you believe everything you read
(A) whether you are willing to demonstrate to others that your action is in alignment with your values
Which of the following best describes the “acceptability heuristic”?
(A) People often “seek out” information that serves to conform the response or position most acceptable to their superiors. Information is categorized by whether it will be acceptable or unacceptable to supervisors.
(B) the overestimation of one’s actual ability, performance, level of control or chance of success
(C) inclines decision-makers to gather information, process information and even remember information in such a manner as to advance their perceived self-interest and to support their preexisting views
(D) allowing one’s opinions to be inappropriately influenced by the dynamics of the group
(A) People often “seek out” information that serves to conform the response or position most acceptable to their superiors. Information is categorized by whether it will be acceptable or unacceptable to supervisors.
All of the following statements about moral perception are true EXCEPT:
(A) Moral perception is skill that is acquired with education and practice.
(B) All adults share the exact same set of perceptual skills.
(C) We are trained as moral perceivers from childhood.
(D) Most of our moral education is acquired unconsciously through the actions we witness as we mature.
(B) All adults share the exact same set of perceptual skills.
According to Aristotle’s account of how we develop a virtuous or vicious character, which of the following is true?
(A) We are born virtuous or vicious.
(B) It is easy to adapt a virtuous character after a life of vicious behavior.
(C) Vicious people are acutely aware of their defects and yearn to be more virtuous.
(D) We create our character through our actions.
(D) We create our character through our actions.
The best definition of a morally salient fact is which of the following?
(A) fact that is disputed by all of the people involved
(B) fact that has been established by a scientific process
(C) fact that has always been accepted as true
(D) fact that reflects or impacts an ethical value or moral principle.
(D) fact that reflects or impacts an ethical value or moral principle.
The best definition of moral perception is which of the following?
(A) the willingness to act in accordance with our moral principles
(B) the capacity to see clearly into the future
(C) the ability to correctly recognize (and assign the appropriate weight to the morally salient facts of a situation
(D) the art of persuading other people to see your point of view
(C) the ability to correctly recognize (and assign the appropriate weight to the morally salient facts of a situation
All of the following are true about the person who gives into temptation EXCEPT:
(A) committed to general moral principles
(B) have a corrupted and vicious character
(C) understand the moral action required by a particular situation
(D) lack the will power to do what they know that they should do
(B) have a corrupted and vicious character
Which of the following best describes “self-serving bias”?
(A) People often “seek out” information that serves to conform the response or position most acceptable to their superiors. Information is categorized by whether it will be acceptable or unacceptable to supervisors.
(B) the overestimation of one’s actual ability, performance, level of control or chance of success
(C) inclines decision-makers to gather information, process information and even remember information in such a manner as to advance their perceived self-interest and to support their preexisting views.
(D) allowing one’s opinions to be inappropriately influenced by the dynamics of the group
(C) inclines decision-makers to gather information, process information and even remember information in such a manner as to advance their perceived self-interest and to support their preexisting views.
A hedonist is someone who believes that
(A) the only good with any value is pleasure.
(B) it is our moral duty to forsake physical enjoyment.
(C) the most important goal in life is to make money.
(D) we should love and cherish all animal life.
(A) the only good with any value is pleasure.
All of the following are true about a vicious person (person with a corrupted character) EXCEPT:
(A) Value other goods (such as wealth, pleasure or power) over moral action.
(B) Deny the existence of moral principles.
(C) Embrace the proposition that we should love our neighbor as ourselves.
(D) Cynically judge those that adhere to moral principles as naïve idiots.
(C) Embrace the proposition that we should love our neighbor as ourselves.
All of the following are ways that moral perception can be distorted EXCEPT:
(A) practical wisdom
(B) ignorance of the particulars
(C) bad moral education
(D) cognitive bias
(A) practical wisdom
Which of the following is the best definition of ethical leadership?
(A) Ethical leaders raise the level of their followers’ ethical behavior.
(B) Ethical leaders possess important personal virtues.
(C) Ethical leaders are terrible managers.
(D) Ethical leaders are moral people in managerial positions.
(A) Ethical leaders raise the level of their followers’ ethical behavior.
All of the following are true of good organizational citizens, EXCEPT
(A) committed to the good of the organization for its own sake
(B) believe in the mission of the organization
(C) willing to help their colleagues, even when there is no direct personal benefit
(D) embrace an “it’s-all-about-me” attitude
(D) embrace an “it’s-all-about-me” attitude
All of the following are true about the role of stories in the organization EXCEPT
(A) Stories provide “mental maps” that let people know what is important and how it is to be achieved.
(B) Stories play a crucial role in transmitting information to new arrivals.
(C) We can use stories to interpret the abstract principles articulated in the organization’s code of ethics and other formal documents.
(D) It is irrelevant whether your audience believes the story.
(D) It is irrelevant whether your audience believes the story.
Which of the following statements is true about organizational culture?
(A) People’s behavior is not impacted by culture.
(B) Organizational cultures can be easily changed by the efforts of one person.
(C) Most people are unaware of the characteristics of their own ethical culture.
(D) Unethical people never congregate together.
(C) Most people are unaware of the characteristics of their own ethical culture.
Which of the following is a characteristic of a formal organizational culture?
(A) public
(B) private
(C) not endorsed by leadership
(D) created by the collective
(A) public
Which of the following is a true statement about reward systems?
(A) People are only incentivized by material rewards.
(B) It is wrong to reward people for acting ethically.
(C) A carefully crafted reward system is crucial for creating an environment in which it is easy to do the right thing.
(D) Incentives are irrelevant to people’s behavior.
(C) A carefully crafted reward system is crucial for creating an environment in which it is easy to do the right thing.
Which of the following characteristics of incentive systems may reveal an unethical culture?
(A) focuses exclusively on results to the exclusion of process and means
(B) focuses on process and means in addition to results
(C) rewards people for acting cooperatively
(D) contains rewards that appeal to self-interest in a broader sense
(A) focuses exclusively on results to the exclusion of process and means
All the following hinder the use the moral language in the workplace, EXCEPT
(A) unwillingness to appear to place ourselves on the “moral high ground”
(B) fear that conversations about ethics do not have a natural terminus
(C) high degree of comfort with using moral terminology
(D) belief that someone who is willing to talk about ethics lacks the toughness to be an effective leader
(C) high degree of comfort with using moral terminology
Which of the following is a characteristic of informal ethical cultures?
(A) created by the collective
(B) public
(C) mandated by leadership
(D) legitimate
(A) created by the collective
All of the following are true statements about codes of ethics, EXCEPT
(A) Codes of ethics are more effective if they are a part of an ethical culture.
(B) There are no consequences if senior leaders ignore the code of ethics.
(C) Codes of ethics define the value system within which the organization’s goals should be pursued.
(D) Codes of ethics are usually designed to achieve educational, regulatory and aspirational goals.
(B) There are no consequences if senior leaders ignore the code of ethics.
All of the following are actions advisors should incorporate as best practices in light of the higher standards of behavior and service they face EXCEPT
(A) Conduct periodic reviews.
(B) Segment their books into A, B, and C clients.
(C) Document their activities.
(D) Refer to other professionals when needed.
(B) Segment their books into A, B, and C clients.
Which of the following fundamental principles of ethical behavior encompasses the principle of equality, which requires professionals to treat “like things in like ways?”
(A) Integrity
(B) Confidentiality
(C) Fairness
(D) Professionalism
(C) Fairness
All of the following questions capture hallmarks of professional behavior clients expect from professionals EXCEPT:
(A) Does the professional seem current in his or her information?
(B) Does the professionals refer to other experts or is he or she intimidated by them?
(C) Does the professional do pro bono work?
(D) Does the professional tell me about his or her designations and affiliations, and am I really dealing with someone knowledgeable?
(C) Does the professional do pro bono work?
Which of the following is one of the characteristics of a professional according to Solomon Huebner?
(A) The professional must conduct his or her affairs in an independent manner.
(B) The professional is not a self-declared professional.
(C) The professional has a written code of ethics.
(D) The professional is involved in a vocation that is useful and noble.
(D) The professional is involved in a vocation that is useful and noble.
All of the following are requirements of a profession EXCEPT
(A) Any profession has at its core a body of subject matter.
(B) Entrance into the profession requires mastery of the technical subject matter.
(C) A profession has as one of its hallmarks no barriers to entry.
(D) Members of the profession must conduct their affairs in an independent manner.
(C) A profession has as one of its hallmarks no barriers to entry.
All of the following are types of agent authority EXCEPT
(A) Express authority
(B) Apparent authority
(C) Discretionary authority
(D) Implied authority
(C) Discretionary authority
All of the following are among the codes of ethics applicable to the financial services professional EXCEPT
(A) the NAIC Code of Ethics
(B) The American College Code of Ethics
(C) the Society of Financial Service Professionals Code of Ethics
(D) the CFP® Code of Ethics
(A) the NAIC Code of Ethics
Which of the following fundamental principles of ethical behavior refers to the level of expert knowledge a professional develops and maintains through continued education and experience?
(A) Competence
(B) Diligence
(C) Objectivity
(D) Integrity
(A) Competence
A code of ethics establishes which of the following for members of a profession?
(A) rules of law
(B) statutes of state
(C) standards of conduct
(D) rules of etiquette
(C) standards of conduct
Which of the following is one of the six basic requirements for a discipline to be considered a profession?
(A) Members of the profession must earn above a standard minimum level of income.
(B) Members of the profession cannot be self-declared as professionals.
(C) Members of the profession must hold a postgraduate degree from an accredited university.
(D) Members of the profession cannot enter the profession prior to a completion of a 7-year apprenticeship and successful completion of written examinations.
(B) Members of the profession cannot be self-declared as professionals.
Which of the following statements regarding risk tolerance is true?
(A) All clients maintain the same level of risk tolerance.
(B) Some clients can accept risk more easily than others.
(C) Risk tolerance is inapplicable to an agent’s insurance practice.
(D) Risk tolerance is applicable to property and casualty and inapplicable to an agent’s life insurance practice.
(B) Some clients can accept risk more easily than others.
All of the following are suggested methods of assessing a client’s tolerance towards risk EXCEPT
(A) investment philosophy test
(B) 80/20 analysis
(C) examination of investment history
(D) review of investment objectives
(B) 80/20 analysis
Which category of investments is considered highly liquid and having either a non-specified maturity date or a maturity date of less than on year into the future?
(A) longer-term debt instruments
(B) equity investments
(C) direct investments
(D) cash equivalents
(D) cash equivalents
Which of the following is an example of an equity investment?
(A) a federal government bond with a 30-year duration
(B) a short-term certificate of deposit
(C) a local jurisdiction bond with a 5-year duration
(D) common stock
(D) common stock
All of the following are factors clients should consider EXCEPT
(A) Liquidity
(B) Employer
(C) Risk-reward trade-off
(D) Tax consequences
(B) Employer
Which of the following statements regarding investment diversification within the context of risk management is correct?
(A) Diversification ensures clients with a low risk tolerance will not have any losses.
(B) Diversification allows clients with a high risk tolerance to balance loss of principal concerns against needs of capital appreciation.
(C) Risk management through diversification plays a minor role in developing financial plans for clients.
(D) A client allocating money between a variety of assets such as stocks, bonds, and real estate.
(D) A client allocating money between a variety of assets such as stocks, bonds, and real estate.
Agents should assume that most clients are
(A) risk-averse
(B) risk seekers
(C) tolerant of moderate levels of risk
(D) tolerant of high levels of risk
(A) risk-averse
After agent Smith has conducted a thorough fact finding with client Jones, agent Smith should
(A) retain these records for use in future periodic reviews
(B) discard these records as quickly as possible to eradicate all documentation of the sales process
(C) archive the records for 6 months before destroying
(D) forward all records to the client for documentation
(A) retain these records for use in future periodic reviews
All of the following are major categories of investment risk EXCEPT
(A) purchasing power risk
(B) market risk
(C) default risk
(D) fluctuation risk
(D) fluctuation risk
Legislative risk involves
(A) the possibility that the law, which currently provides a favorable environment for an investment, may change
(B) the possibility that the law, which currently provides a hostile environment for an investment, may change
(C) exposure to investment default
(D) exposure to investment appreciation
(A) the possibility that the law, which currently provides a favorable environment for an investment, may change
Misrepresentations are distinguished from acts of fraud because they can be which of the following?
I. unintentional
IL acts of omission
Both I and II
All of the following are necessary steps in an ethically sound sales process EXCEPT
(A) Gain client attention
(B) Illustrate downside risk
(C) Comply with regulations and mandated standards
(D) Communicate service standards
(D) Communicate service standards
Full disclosure involves providing a client with four key pieces of information, including which of the following?
(A) Information about the competition
(B) Information about the historical performance of alternative products
(C) Information about the illustration used in the sales presentation
(D) Information regarding the regulatory body that governs the advisor
(C) Information about the illustration used in the sales presentation
Which of the following is a component of misrepresentation?
(A) intentionality
(B) the speaker doesn’t need to know that the victim is relying on the factual correctness of his or her statements
(C) an element of fraud
(D) needs to have resulted in a loss to the victim
(D) needs to have resulted in a loss to the victim
Which of the following is an example of a scare tactic?
I. Immediately add $100,000 to your net worth.
II. Act now…before it’s too late.
II only
Advisors should document three elements of every sale, including which of the following?
I. The reason for the product recommendation
II. The amount of the advisor’s commission
(A) I only
All of the following are an element of the continuum of five disclosure strategies EXCEPT
(A) Minimal information rule
(B) Fairness rule
(C) Full disclosure rule
(D) Mutual benefit rule
(C) Full disclosure rule
Ethical pitfalls that occur in the sales process include which of the following:
I. Failure to recommend and sell only suitable products
II. Failure to recognize and disclose relevant conflicts of interest
(C) Both I and II
Which of the following is a benefit of full disclosure?
(A) It provides unlimited avoidance of potential legal problems.
(B) It includes state-mandated bonus commission structures.
(C) It results in a waiver of state licensing fees.
(D) It limits legal liability and cements sales.
(D) It limits legal liability and cements sales.
Which of the following is an ethical pitfalls that occur in the marketing process?
(A) Misrepresentation
(B) Failure to recommend and sell only suitable products
(C) Using scare tactics
(D) Failure to recognize and disclose relevant conflicts of interes
(C) Using scare tactics
Which concept best fits the following activity? “An advisor initiates activity within the client’s account or policy, which does not benefit the client and only benefits the advisor through generating fees.”
(A) twisting
(B) rebating
(C) churning
(D) excessive trading
(C) churning
Under which of the following compensation models discussed in the text is the sale of unsuitable products a temptation?
(A) assets under management (AUM)
(B) commission
(C) flat-fee
(D) salary
(B) commission
Which of the following is an example of a conflict of the interest between a client and an advisor created by the advisor’s actions?
(A) A company creates a product where the risks are hidden from both the advisor and the client.
(B) The advisor receives additional compensation from an incentive program developed by the company in order to encourage the sale of specific products.
(C) A company creates an attractive investment opportunity that is only marketed to its ‘high-value’ clients.
(D) The advisor sells the information of his ‘high-value’ clients to a local attorney for a sizable fee.
(D) The advisor sells the information of his ‘high-value’ clients to a local attorney for a sizable fee.
Under which of the following compensation models discussed in the text is ‘shirking’ a temptation?
(A) assets under management (AUM)
(B) commission
(C) flat-fee
(D) salary
(C) flat-fee
Which of the following situations is best described as a ‘failure to execute’?
(A) An advisor fails to record and promptly turn over a premium payment to the issuing company.
(B) An advisor sells an unsuitable product.
(C) An advisor fails to effectively supervise his office staff.
(D) An advisor leaves out materially relevant information when describing the benefits of a particular product.
(A) An advisor fails to record and promptly turn over a premium payment to the issuing company.
Which of the following is a benefit of a fixed-indexed annuity?
(A) principal protection
(B) high rates of return
(C) high liquidity
(D) no termination fees
(A) principal protection
All of the following are true statements about dementia, EXCEPT:
(A) Dementia is a natural part of the aging process.
(B) Dementia can be reversible in some cases.
(C) Dementia may not result in complete cognitive incapacity.
(D) People suffering from dementia may suffer from memory loss and declines in visual perception.
(A) Dementia is a natural part of the aging process.
Which of the following temptations would be most relevant to an hourly compensation model?
(A) recommending products that aren’t suitable for clients
(B) overcharging a client based on “value billing,” which is charging a client based on the value of the service instead of on the time it took to complete
(C) churning, which involves instigating empty transactions in order to generate commissions, without benefitting the client at all.
(D) discouraging clients from moving money out of their account even when it’s in their best interest
(B) overcharging a client based on “value billing,” which is charging a client based on the value of the service instead of on the time it took to complete
Which of the following is a true statement about financial capacity?
(A) People have relatively similar levels of financial capacity.
(B) Courts tend to recommend formal legal guardianship when there is any level of diminishment in financial capacity.
(C) Diminished financial capacity can be evidenced by arithmetic mistakes and impaired judgment.
(D) An individual’s values are irrelevant in assessing financial capacity.
(C) Diminished financial capacity can be evidenced by arithmetic mistakes and impaired judgment.
The growth of the Internet has changed the industry in all of the following ways EXCEPT:
(A) Banks are still able to depend on ‘high switching’ costs to ensure customer loyalty.
(B) Consumers are able to perform simple transactions (such as checking account balances) on their own.
(C) It makes it easier for companies to communicate with customers and potential customers.
(D) It makes it easier for consumers to compare prices in real time.
(A) Banks are still able to depend on ‘high switching’ costs to ensure customer loyalty.
Under which of the following compensation models discussed in the text is ‘shirking’ a temptation?
(A) assets under management (AUM)
(B) commission
(C) flat-fee
(D) salary
(C) flat-fee
Under which of the following compensation models discussed in the text is the sale of unsuitable products a temptation?
(A) assets under management (AUM)
(B) commission
(C) flat-fee
(D) salary
(B) commission
All of the following are true statements about dementia, EXCEPT:
(A) Dementia is a natural part of the aging process.
(B) Dementia can be reversible in some cases.
(C) Dementia may not result in complete cognitive incapacity.
(D) People suffering from dementia may suffer from memory loss and declines in visual perception.
(A) Dementia is a natural part of the aging process.
Which of the following is a true statement about financial capacity?
(A) People have relatively similar levels of financial capacity.
(B) Courts tend to recommend formal legal guardianship when there is any level of diminishment in financial capacity.
(C) Diminished financial capacity can be evidenced by arithmetic mistakes and impaired judgment.
(D) An individual’s values are irrelevant in assessing financial capacity.
(C) Diminished financial capacity can be evidenced by arithmetic mistakes and impaired judgment.
Which of the following temptations would be most relevant to an hourly compensation model?
(A) recommending products that aren’t suitable for clients
(B) overcharging a client based on “value billing,” which is charging a client based on the value of the service instead of on the time it took to complete
(C) churning, which involves instigating empty transactions in order to generate commissions, without benefitting the client at all.
(D) discouraging clients from moving money out of their account even when it’s in their best interest
(B) overcharging a client based on “value billing,” which is charging a client based on the value of the service instead of on the time it took to complete
Which of the following is a benefit of a fixed-indexed annuity?
(A) principal protection
(B) high rates of return
(C) high liquidity
(D) no termination fees
(A) principal protection
Ethical pitfalls that occur in the sales process include which of the following:
I. Failure to recommend and sell only suitable products
II. Failure to recognize and disclose relevant conflicts of interest
(C) Both I and II
Which of the following is an example of a scare tactic?
I. Immediately add $100,000 to your net worth.
II. Act now…before it’s too late.
II only
Advisors should document three elements of every sale, including which of the following?
I. The reason for the product recommendation
II. The amount of the advisor’s commission
(A) I only
Misrepresentations are distinguished from acts of fraud because they can be which of the following?
I. unintentional
IL acts of omission
Both I and II
All of the following are an element of the continuum of five disclosure strategies EXCEPT
(A) Minimal information rule
(B) Fairness rule
(C) Full disclosure rule
(D) Mutual benefit rule
(C) Full disclosure rule
All of the following are necessary steps in an ethically sound sales process EXCEPT
(A) Gain client attention
(B) Illustrate downside risk
(C) Comply with regulations and mandated standards
(D) Communicate service standards
(D) Communicate service standards
Agents should assume that most clients are
(A) risk-averse
(B) risk seekers
(C) tolerant of moderate levels of risk
(D) tolerant of high levels of risk
(A) risk-averse
Legislative risk involves
(A) the possibility that the law, which currently provides a favorable environment for an investment, may change
(B) the possibility that the law, which currently provides a hostile environment for an investment, may change
(C) exposure to investment default
(D) exposure to investment appreciation
(A) the possibility that the law, which currently provides a favorable environment for an investment, may change
All of the following are factors clients should consider EXCEPT
(A) Liquidity
(B) Employer
(C) Risk-reward trade-off
(D) Tax consequences
(B) Employer
All of the following are suggested methods of assessing a client’s tolerance towards risk EXCEPT
(A) investment philosophy test
(B) 80/20 analysis
(C) examination of investment history
(D) review of investment objectives
(B) 80/20 analysis
All of the following are major categories of investment risk EXCEPT
(A) purchasing power risk
(B) market risk
(C) default risk
(D) fluctuation risk
(D) fluctuation risk
Which of the following is a sphere that is governed by the virtue of justice:
(A) fear of important damages, especially death
(B) bodily appetites and their pleasure
(C) distribution of limited resources
(D) the planning of one’s life and conduct
(C) distribution of limited resources
Which of the following is the best definition of moral relativism?
(A) Moral values are relative to cultures.
(B) There are certain moral standards that are universally true.
(C) There is no such thing as morality.
(D) Everyone should be tolerant of different moral views.
(A) Moral values are relative to cultures.
All of the following are consequences of moral relativism EXCEPT:
(A) The idea of moral progress is called into doubt.
(B) All societies are equally tolerant of other societies’ beliefs.
(C) We could decide whether actions are right or wrong by consulting the standards of our own society.
(D) We could no longer say that the beliefs of other societies were inferior to our own.
(B) All societies are equally tolerant of other societies’ beliefs.
Which of the following is the guiding principle of Mill’s Utilitarianism?
(A) Actions are moral insofar as they promote the greatest good for the greatest number.
(B) Actions are moral insofar as they treat people as ends and not as means.
(C) Actions are moral if they align for a given society’s moral standards.
(D) Actions are moral if they are in accord with the virtues.
(A) Actions are moral insofar as they promote the greatest good for the greatest number.
Which of the following is the guiding principle of Kant’s Deontology?
(A) Actions are moral insofar as they promote the greatest good for the greatest number.
(B) Actions are moral insofar as they treat people as ends and not as means.
(C) Actions are moral if they align for a given society’s moral standards.
(D) Actions are moral if they are in accord with the virtues.
(B) Actions are moral insofar as they treat people as ends and not as means.
Which of the following is the guiding principle of Aristotle’s Virtue Ethics?
(A) Actions are moral insofar as they promote the greatest good for the greatest number.
(B) Actions are moral insofar as they treat people as ends and not as means.
(C) Actions are moral if they align for a given society’s moral standards.
(D) Actions are moral if they are in accord with the virtues.
(D) Actions are moral if they are in accord with the virtues.
Which of the following is the best definition of psychological egoism?
(A) People always act only to promote their perceived self-interest.
(B) People should only be motivated by a desire to help other people.
(C) People usually choose to be selfish.
(D) People are inherently evil.
(A) People always act only to promote their perceived self-interest.
The best definition of moral perception is which of the following?
(A) the willingness to act in accordance with our moral principles
(B) the capacity to see clearly into the future
(C) the ability to correctly recognize (and assign the appropriate weight to the morally salient facts of a situation
(D) the art of persuading other people to see your point of view
(C) the ability to correctly recognize (and assign the appropriate weight to the morally salient facts of a situation
The best definition of a morally salient fact is which of the following?
(A) fact that is disputed by all of the people involved
(B) fact that has been established by a scientific process
(C) fact that has always been accepted as true
(D) fact that reflects or impacts an ethical value or moral principle.
(D) fact that reflects or impacts an ethical value or moral principle.
All of the following statements about moral perception are true EXCEPT:
(A) Moral perception is skill that is acquired with education and practice.
(B) All adults share the exact same set of perceptual skills.
(C) We are trained as moral perceivers from childhood.
(D) Most of our moral education is acquired unconsciously through the actions we witness as we mature.
(B) All adults share the exact same set of perceptual skills.
All of the following are ways that moral perception can be distorted EXCEPT:
(A) practical wisdom
(B) ignorance of the particulars
(C) bad moral education
(D) cognitive bias
(A) practical wisdom
Which of the following best describes the “acceptability heuristic”?
(A) People often “seek out” information that serves to conform the response or position most acceptable to their superiors. Information is categorized by whether it will be acceptable or unacceptable to supervisors.
(B) the overestimation of one’s actual ability, performance, level of control or chance of success
(C) inclines decision-makers to gather information, process information and even remember information in such a manner as to advance their perceived self-interest and to support their preexisting views
(D) allowing one’s opinions to be inappropriately influenced by the dynamics of the group
(A) People often “seek out” information that serves to conform the response or position most acceptable to their superiors. Information is categorized by whether it will be acceptable or unacceptable to supervisors.
Which of the following best describes “self-serving bias”?
(A) People often “seek out” information that serves to conform the response or position most acceptable to their superiors. Information is categorized by whether it will be acceptable or unacceptable to supervisors.
(B) the overestimation of one’s actual ability, performance, level of control or chance of success
(C) inclines decision-makers to gather information, process information and even remember information in such a manner as to advance their perceived self-interest and to support their preexisting views.
(D) allowing one’s opinions to be inappropriately influenced by the dynamics of the group
(C) inclines decision-makers to gather information, process information and even remember information in such a manner as to advance their perceived self-interest and to support their preexisting views.
All of the following are true about the person who gives into temptation EXCEPT:
(A) committed to general moral principles
(B) have a corrupted and vicious character
(C) understand the moral action required by a particular situation
(D) lack the will power to do what they know that they should do
(B) have a corrupted and vicious character
Which of the following is a characteristic of informal ethical cultures?
(A) created by the collective
(B) public
(C) mandated by leadership
(D) legitimate
(A) created by the collective
All of the following are true about the role of stories in the organization EXCEPT
(A) Stories provide “mental maps” that let people know what is important and how it is to be achieved.
(B) Stories play a crucial role in transmitting information to new arrivals.
(C) We can use stories to interpret the abstract principles articulated in the organization’s code of ethics and other formal documents.
(D) It is irrelevant whether your audience believes the story.
(D) It is irrelevant whether your audience believes the story.
All the following hinder the use the moral language in the workplace, EXCEPT
(A) unwillingness to appear to place ourselves on the “moral high ground”
(B) fear that conversations about ethics do not have a natural terminus
(C) high degree of comfort with using moral terminology
(D) belief that someone who is willing to talk about ethics lacks the toughness to be an effective leader
(C) high degree of comfort with using moral terminology
All of the following are true of good organizational citizens, EXCEPT
(A) committed to the good of the organization for its own sake
(B) believe in the mission of the organization
(C) willing to help their colleagues, even when there is no direct personal benefit
(D) embrace an “it’s-all-about-me” attitude
(D) embrace an “it’s-all-about-me” attitude
Which of the following characteristics of incentive systems may reveal an unethical culture?
(A) focuses exclusively on results to the exclusion of process and means
(B) focuses on process and means in addition to results
(C) rewards people for acting cooperatively
(D) contains rewards that appeal to self-interest in a broader sense
(A) focuses exclusively on results to the exclusion of process and means
Which of the following is the best definition of ethical leadership?
(A) Ethical leaders raise the level of their followers’ ethical behavior.
(B) Ethical leaders possess important personal virtues.
(C) Ethical leaders are terrible managers.
(D) Ethical leaders are moral people in managerial positions.
(A) Ethical leaders raise the level of their followers’ ethical behavior.
Identifying stakeholder interests requires us to do which of the following?
(A) think about stakeholder interests from the point of view of the stakeholder
(B) broaden our definition of interest to include nonmaterial interests such as self-respect and autonomy
(C) think imaginatively about who could be harmed or benefitted by our actions
(D) all of the above
(D) all of the above
Which of the following is the best definition of normative power as it is described in the text?
(A) depends on the physical forces of violence or restraint
(B) results from “blackmail” or the possession of a strategic piece of information that the person does not want made public
(C) depends on the deployment of financial or material resources
(D) based on the use of symbolic resources
(D) based on the use of symbolic resources
According to the text, which of the following offers the best definition of procedural justice?
(A) The most powerful stakeholders get their way.
(B) Every stakeholder receives an equal share of benefits and harms.
(C) All stakeholders are allowed to participate in the determination of issues that impact them.
(D) The outcome is fair even if the process is not just.
(C) All stakeholders are allowed to participate in the determination of issues that impact them.
According to the text, moral behavior is best described as which of the following goods?
(A) Moral behavior is good for itself.
(B) Moral behavior is not good at all.
(C) Moral behavior is good for its consequences.
(D) Moral behavior is good for itself and its consequences.
(D) Moral behavior is good for itself and its consequences.
When we think about the consequences of our actions, which of the following should we keep in mind?
(A) What are the short-term consequences of our actions?
(B) What are the long-term consequences of our actions?
(C) How might ethical standards change and how would these changes affect the moral quality of our actions?
(D) all of the above
(D) all of the above
Which of the following is assessed by so-called “publicity tests”?
(A) whether you are willing to demonstrate to others that your action is in alignment with your values
(B) whether you seek publicity at the expense of your personal relationships
(C) whether you are willing to speak to the media about your personal ethics
(D) whether you believe everything you read
(A) whether you are willing to demonstrate to others that your action is in alignment with your values
Which of the following fundamental principles of ethical behavior refers to the level of expert knowledge a professional develops and maintains through continued education and experience?
(A) Competence
(B) Diligence
(C) Objectivity
(D) Integrity
(A) Competence
A code of ethics establishes which of the following for members of a profession?
(A) rules of law
(B) statutes of state
(C) standards of conduct
(D) rules of etiquette
(C) standards of conduct
All of the following are requirements of a profession EXCEPT
(A) Any profession has at its core a body of subject matter.
(B) Entrance into the profession requires mastery of the technical subject matter.
(C) A profession has as one of its hallmarks no barriers to entry.
(D) Members of the profession must conduct their affairs in an independent manner.
(C) A profession has as one of its hallmarks no barriers to entry.
All of the following are among the codes of ethics applicable to the financial services professional EXCEPT
(A) the NAIC Code of Ethics
(B) The American College Code of Ethics
(C) the Society of Financial Service Professionals Code of Ethics
(D) the CFP® Code of Ethics
(A) the NAIC Code of Ethics
All of the following questions capture hallmarks of professional behavior clients expect from professionals EXCEPT:
(A) Does the professional seem current in his or her information?
(B) Does the professionals refer to other experts or is he or she intimidated by them?
(C)Does the professional do pro bono work?
(D) Does the professional tell me about his or her designations and affiliations, and am I really dealing with someone knowledgeable?
(C)Does the professional do pro bono work?
All of the following are types of agent authority EXCEPT
(A) Express authority
(B) Apparent authority
(C) Discretionary authority
(D) Implied authority
(C) Discretionary authority
All of the following are actions advisors should incorporate as best practices in light of the higher standards of behavior and service they face EXCEPT
(A) Conduct periodic reviews.
(B) Segment their books into A, B, and C clients.
(C) Document their activities.
(D) Refer to other professionals when needed.
(B) Segment their books into A, B, and C clients.
