Fundamentals of Financial Planning

Question 1

fiduciary duty

Answer 1

duty of loyalty, duty of care, follow client instructions

Question 2

integrity

Answer 2

honesty, upstanding, candor

Question 3

competence

Answer 3

relevantly apply knowledge

gain knowledge, obtain assistance, limit scope, or refer if competence is lacking

Question 4

diligence

Answer 4

timely, thorough

Question 5

disclose and manage conflicts of interest

Answer 5

consent does not need to be in writing
ambiguity on side of client

assume financial conflicts are material

Question 6

material conflict of interest

Answer 6

one that could influence client decision or cause substantial harm

Question 7

sound and objective professional judgment

Answer 7

do not accept or solicit gifts that could influence CFP judgment

Question 8

professionalism

Answer 8

dignity, courtesy, respect

Question 9

comply with the law

Answer 9

avoid intentionally or recklessly violating laws, rules, regulations, standards

can apply to making poor referrals

Question 10

confidentiality and privacy

Answer 10

consent, ordinary business, legal and enforcement purposes, policies

no absolute confidentiality

Question 11

provide information to a client

Answer 11

financial advice, financial planning

Question 12

communicating with a client

Answer 12

ensure client understanding

consider multiple forms of communication

Question 13

duties with representing compensation

Answer 13

fee-only, fee-based, sales related compensation, soft dollars, non-monetary benefits, related party

Question 14

recommending, engaging, and working with additional persons

Answer 14

reasonable basis, reputation, experience, qualifications, disclosure, reasonable care

Question 15

selecting and using technology

Answer 15

reasonable care and judgment, level of understanding

Question 16

refrain from borrowing/lending money and commingling

Answer 16

client lending/borrowing generally prohibited- exception family members and if the cfp is in the business of lending/borrowing

Question 17

duty of loyalty

Answer 17

cfp professional must put the interest of the client ahead of their own, avoid conflicts of interest/fully disclose material conflicts/obtain client consent, act without regard to the financial or other interests of cfp

Question 18

duty of care

Answer 18

cfp must act with the care, skill, prudence, and diligence that a prudent professional would exercise in light of the client’s situation and goals

Question 19

duty to follow client instructions

Answer 19

cfp must comply with all objectives, policies, restrictions, and other terms of the engagement and all reasonable/lawful directions of the client

Question 20

financial planning practice standards

Answer 20

Understand the client’s personal and financial circumstances
Identify and select goals
Analyze client’s current course of action and potential alternative course(s) of action
Develop financial panning recommendation(s)
Present the recommendations
Implement the recommendations
Monitor progress and updating

Question 21

RIA must register with state

Question 22

RIA must register with SEC

Answer 22

> $110M under management

Question 23

RIA can register with either SEC or state, their choice

Answer 23

$100M-$110M under management

Question 24

Investment Advisors Act of 1940 definition of investment advisor

Answer 24

someone who in the BUSINESS of providing ADVICE about securities for COMPENSATION (abc)

Question 25

Form to register with SEC

Answer 25

Form ADV

Question 26

Form to withdraw registration with SEC

Answer 26

Form ADV-W

Question 27

Form ADV part 1

Answer 27

contains investment business, ownership, clients, employees, business practices, affiliations, and disciplinary events of the advisors or employees

RIA must electronically file annually within 90 days of fiscal year end

Question 28

Form ADV part 2

Answer 28

contains advisor’s fees, compensation, education, investment objectives, conflicts of interest, and the background of advisory personnel

required to be written in plain english

must be promptly updated if any information becomes materially inaccurate, otherwise changes may be made annually

Question 29

Form ADV part 3

Answer 29

CRS

provides succinct information to a retail investor about the relationship and service the firm offers