Fundamentals of Financial Planning Flashcards
Katie owns 1 share of stock that was purchased 5 years ago for $20. The stock paid dividends of:
Year 1: $2.00
Year 2: $3.00
Year 3: $3.50
Year 4: $4.00
Year 5: $4.50
At the end of Year 5, the stock was worth $25. What is Katie’s compounded rate of return (IRR)?
A.4.6
B.8.5
C.12.4
D.19.3
Solution: The correct answer is D.
CFo = <20>
CFj = 2.00
CFj = 3.00
CFj = 3.50
CFj = 4.00
CFj = 4.50 + 25 = 29.50
IRR = 19.3%
On December 31st Lisa purchased a home with a 20-year mortgage for $150,000 and an 8% compounding interest rate. What is Lisa’s principal reduction for the first year?
A.$1,814
B.$3,171
C.$2,507
D.$3,912
Solution: The correct answer is B.
N = 20 × 12 = 240
i = 8/12 = .6667
PV = 150,000
PMT = ?
FV = 0
PMT = 1,254.66 (ensure you are in END MODE in this step)
To complete the answer, one more step must be done:
On the TI BAII Plus, 2nd AMORT, P1 = 1, enter, down arrow, P2 = 12, enter, down arrow twice to PRN
Final answer is $3,170.4993 rounded to $3,171.
Tom, a CFP® professional, has developed a comprehensive financial plan for his client. Based on the CFP Board Practice Standards which of the following should Tom do next?
A.Review the plan with the client’s CPA and Attorney prior to contacting the client.
B.Implement the financial planning recommendations.
C.Present the financial planning recommendations to his client.
D.Develop financial planning recommendations.
Solution: The correct answer is C.
A CFP® professional must present to the Client the selected recommendations and the information that was required to be considered when developing the recommendation(s). A is incorrect, this level of diligence is not required of a CFP® professional. B is incorrect, this step occurs after presentation. D is incorrect, this step occurs before presentation.
Which of the following are forms of discipline according to CFP Board’s Code of Ethics:
Suspension
Public Letter of Admonishment
Private Censure Released on CFP Board’s Public Website
Temporary Revocation
A.I and II
B.I, II and IV
C.III and IV
D.II and III
Solution: The correct answer is A.
A private censure made public is a public letter of admonishment. Revocation is always permanent.
What is the net present value of the cash flows from a piece of equipment that is purchased for $10,000 and over a 4 year period generates the following cash flows:
Year 1: $2,000
Year 2: $2,500
Year 3: $3,500
Year 4: $4,000
Assume the equipment can be sold at the end of the 4th year for $1,000 and assume the required rate of return is 7%.
A.<724>
B.724
C.<674>
D.674
Solution: The correct answer is B.
CFo = <10,000>
CFj = 2,000
CFj = 2,500
CFj = 3,500
CFj = 4,000+1,000=5,000
i = 7
NPV = 724
Which one of the following are false regarding Coverdell ESA and a 529 Savings Plan?
A.A 529 Plan allows 5-year proration of contributions.
B.A Coverdell has a phase-out limit for participation.
C.A 529 Plan does not have a phaseout limit for participation.
D.Distributions from an ESA or 529 can be used for private elementary, middle school, high school, college or trade school and qualified apprenticeships.
Solution: The correct answer is D.
As of 2018, a 529 Plan may also be used for private elementary, middle or high school as can an ESA.
SECURE Act 2019 added qualified distributions from a 529 plan for trade schools and qualified apprenticeships. ESAs did not see the same changes from this Act.
Ross is employed as a loan officer at a local bank. Ross recently sat down and visited with his financial planner Julie, a CFP® professional. Ross was in need of cash and borrowed $9,500 from Julie. Based on duties owed to a client (15- Refrain from Borrowing or Lending Money and Commingling Financial Assets) is Julie in violation of this rule?
A.Julie is not in violation of the rule because Ross is in the business of lending money
B.Julie is in violation of the rule because a CFP® certificant must never lend money to a client.
C.Julie is not in violation since she loaned Ross less than $10,000.
D.Julie is in violation of the rule.
Solution: The correct answer is D.
Julie, as a CFP® professional, is prohibited from borrowing money from or lending money to a client, except in specific circumstances. In this case, Ross is Julie’s client, and there’s no indication that Ross is a member of Julie’s family or that Julie is a business organization in the business of lending money. Therefore, by lending $9,500 to Ross, Julie is in clear violation of the rule.
Robert, a CFP® professional, performed a needs analysis concerning Jack’s life insurance situation last year and sold him a universal life policy under a limited scope engagement. This year, Jack wants Robert to evaluate his investment allocation, risk tolerance and recommend some mutual funds. All of the following information is required to be provided to Jack according to the Code of Ethics and Standards of Conduct EXCEPT?
A.Terms of the engagement including the scope of the engagement with any limitations, the period services will be provided and responsibilities of the Client.
B.Disclosure of Economic Benefit for Referral or Engagement of Additional Persons.
C.How the CFP® professional and their firm are compensated for providing products and services.
D.A written agreement covering the specific obligations and responsibilities of each party.
Solution: The correct answer is D.
Robert’s obligations of disclosure to Jack require (Obligations to clients 10) disclosing answers B and C. As the engagement will require a discussion of client goals and working to meet those goals this is a financial planning engagement. As such any limitations, end date and a scope of engagement must be provided.
Subjectivity tends to dominate whose thinking regarding financial success?
A.Client
B.Planner
C.Client & Planner
Solution: The correct answer is A.
When it comes to choice architecture, a financial planner should do all of the following except:
A.Put the client’s best interest first
B.Offer every option available to ensure the client makes an informed decision
C.Design an environment that encourages the client’s freedom of choice
D.Frame choices around the client’s goals
Solution: The correct answer is B.
Choice architecture refers to the manner in which a planner presents choices to a client and how it influences the decision-maker. A planner shouldn’t present every possible option since this approach will likely overwhelm the client and lead to no action being taken.
The other three statements are all true.
You have been working with your client, Brenda, for 3 months now. You developed a mission statement, goals, and objectives with the client. You are now constructing a plan that is led by the client’s mission statement. Which approach to financial planning are you utilizing?
A.Life Cycle Approach
B.Strategic Approach
C.Three Panel Approach
D.Metrics Approach
Solution: The correct answer is B.
The strategic approach is led by the client’s mission statement. The life cycle approach utilizes quick and simple data collection in a nonthreatening way permitting the financial planner to quickly focus on expected needs. The metrics approach utilizes qualitative benchmarks to determine where a client should be. The three panel approach compares the client’s actual financial situation with benchmark criteria.
During your work with your new client, Eliana, you created several visual representations of how your client spends her money. Which approach to financial planning are you utilizing?
A.Pie Chart Approach
B.Cash Flow Approach
C.Financial Statement Approach
D.Metrics Approach
Solution: The correct answer is A.
The pie chart approach provides a visual representation of how the client spends her money. The cash flow approach takes an income statement approach to recommendations. The financial statement approach helps establish where the client is today and uses ratio analysis to determine the client’s weaknesses and strengths. The metrics approach utilizes quantitative benchmarks to determine where a client should be.
Utilizing the three panel approach, which of the following would be evaluated in Panel 1 - Risk Management?
A.Emergency Fund
B.Education fund
C.Retirement Fund
D.Life Insurance
Solution: The correct answer is D.
Life insurance would be evaluated as part of Panel 1 - Risk Management. The emergency fund would be evaluated as part of Panel 2 - Short Term Savings and Investment. The education and retirement funds would be evaluated as part of the Panel 3 - Long Term Savings.
Craig’s financial planner is preparing his balance sheet. Which of the following would not generally be considered an “investment asset?”
A.Cash value in life insurance.
B.Money market account.
C.Certificate of deposit with a 18-month maturity.
D.401(K) account.
Solution: The correct answer is B.
The cash value in life insurance is generally considered an investment asset except when the client intends to withdraw it within the year. Since the CD matures in more than 12 months, it is also considered an investment asset.
What step should the financial planner do after gathering all the client’s qualitative and quantitative financial information and addressing any incomplete information?
A.Establishing and defining the client relationship.
B.Developing the financial plan recommendations.
C.Identify and select goals with the client.
D.Implement the financial plan recommendations.
Solution: The correct answer is C.
Which of the following statements concerning income and expenses listed on the Income Statement is correct?
A.Charitable contributions are always a discretionary expense.
B.Employer matching contributions are not reported on the income statement.
C.A mortgage payment is an example of a variable expense.
D.Social Security taxes withheld is an example of a variable expense.
Solution: The correct answer is B.
Social Security taxes withheld is an example of fixed expenses. Charitable contributions may be either discretionary or non-discretionary expenses depending on the client’s perspective. Employer matching contributions are not reported on the income statement. A mortgage payment is an example of a fixed expense.
Instructor Note: B is a true statement, this coursework does not cover corporate accounting.
What is the maximum potential gift tax free contribution to a 529 Plan in the current year, if grandparents elect gift-splitting?
A.$19,000
B.$38,000
C.$95,000
D.$190,000
Solution: The correct answer is D.
$19,000 × 2 × 5 = $190,000
Annual exclusion × 2 for gift splitting × 5 year pro ration.
A state 529 program may take more than $190,000.
The given answer ($190,000) is only correct if the grandparents have not made any other contributions within the last 5 years.
A is incorrect as it reflects the annual exclusion amount in 2025.
B is incorrect as it reflects the annual exclusion amount as a gift split.
C is incorrect as it reflects a 5-year front loading amount for an individual, not from both grandparents.
All of the following statements are true, except?
A.The American Opportunity credit is available for the first four years of a degree program or certificate.
B.The American Opportunity credit does not include course materials.
C.The American Opportunity credit is awarded on a per student basis.
D.The Lifetime Learning credit is awarded on a per family basis.
Solution: The correct answer is B.
The American Opportunity credit now includes course materials.
The American Opportunity credit is per student.
The Lifetime Learning credit is per family.
The following type of financial aid is awarded to students with a low SAI (formerly EFC) and are funds guaranteed to be available if a student qualifies financially:
A.Pell Grant
B.Plus Loan
C.Work Study
D.Stafford Loan
Solution: The correct answer is A.
Pell Grants are always available if a student qualifies.
Will is a freshman at Florida State University where his tuition is $4,000. Sydney, his older sister, is a junior at Expensive University, where tuition is $25,000. What is the maximum tax credit Will and Sydney’s parents can take?
A.$2,000
B.$3,800
C.$4,000
D.$5,000
Solution: The correct answer is D.
Will = American Opportunity= $2,500
2,000 × 100% = 2,000
2,000 × 25% = 500
Sydney = American Opportunity = $2,500
2,000 × 100% = 2,000
2,000 × 25% = 500
All of the following statements concerning financial aid programs for education funding are correct EXCEPT:
A.A Pell Grant is a grant from the federal government awarded to undergraduate students who have not earned a bachelors or professional degree.
B.The SAI calculation (formerly EFC), which is based on one’s ACT score, is used to determine a student’s eligibility for a Pell Grant and how much is awarded to a student.
C.One type of Stafford Loan is the Direct Stafford Loan that is provided to the student directly from the Department of Education.
D.One type of Stafford Loan is the FFEL Stafford Loan where funds are lent to the student through a lender (such as a bank or other approved financial institution) that participates in the FFEL program.
E.An unsubsidized Stafford Loan is one in which the borrower is charged interest on the principal from the moment of disbursement until the loan is paid off.
Solution: The correct answer is B.
The SAI calculation, which is based on one’s financial need, is used to determine a student’s eligibility for a Pell Grant and how much is awarded to a student.
All of the following statements concerning educational funding is correct EXCEPT:
A.A student must submit a FAFSA (Free Application for Federal Student Aid) form to become eligible for federal financial aid.
B.The SAI (Student Aid Index) is a formula that indicates how much of a student’s family’s resources ought to be available to assist in paying for the student’s college education.
C.Factors used in calculating the SAI include taxable and nontaxable income, assets, and benefits such as unemployment and Social Security.
D.The income and assets of the student’s family will only be counted if the student is considered dependent on the parents.
E.529 Savings Plans are treated as assets of the child in calculating the SAI.
Solution: The correct answer is E.
529 Savings plans are considered assets of the parent if owned by the parent or the child. When owned by a third party, the assets are not included in the SAI calculation.
Which of the following would cause the demand curve to shift to the right?
A.Increased savings rate
B.Decrease tax rate
C.Price change
D.More suppliers
Solution: The correct answer is B.
Anytime consumers have more money in their pocket, the demand curve is going to shift up and to the right. A decrease in the tax rate puts more spending money in the consumer’s pocket.
An increase in the savings rate puts less spending money in the consumers pocket and will cause the demand curve to shift down and to the left.
If the price of movie tickets decreases by a small amount, but there is a significantly large increase in demand, what can be said about the demand?
A.Elastic
B.Inelastic
C.Change in quantity demanded
D.Change in demand
Solution: The correct answer is A.
Draw a graph of elastic demand, horizontal and sloping down and to the right.
If demand is inelastic, then demand does not change much for changes in price. Draw inelastic demand as almost a vertical line.
If the Federal Reserve wants to increase interest rates, which of the following actions might they take?
A.Buy government securities
B.Sell government securities
C.Decrease the reserve requirement
D.Decrease the prime lending rate
Solution: The correct answer is B.
For interest rates to increase, the money supply must decrease. If the federal reserve SELLS government securities, they are putting notes on the market and taking cash off the market. As cash comes off the market, the money supply decreases and interest rates increase.
Which of the following is NOT one of the primary responsibilities of the Federal Reserve?
A.Maintain price levels supported by the economy
B.Maintain long term economic growth
C.Maintain full employment
D.Ensure consistent positive returns in the equity markets
Solution: The correct answer is D.
The FED’s primary responsibilities are:
1 – Maintain reasonable price levels
2 – Maintain reasonable long term economic growth
3 – Maintain full employment
Identify which principle applies to each of the following actions (in order) as it pertains to the Code of Ethics:
- Know your limitations and refer what you don’t know
- Do not disclose client information
- Properly supervise subordinates
A. Diligence - Competence - Confidentiality
B. Diligence - Confidentiality - Competence
C. Competence - Confidentiality - Diligence
D. None of the above
Solution: C
Competence: Know your limitations and refer what you don’t know
Confidentiality: Do not disclose client information
Diligence: Properly supervise subordinates
Which of the following is not a principle of the CFP Board Code of Ethics and Standards of Conduct?
A.Integrity
B.Objectivity
C.Professionalism
D.Prudence
Solution: The correct answer is D.
Which of the following circumstances would a CFP® professional not be able to disclose confidential client information?
A.Civil dispute between planner and client
B.Court order to satisfy a legal proceeding
C.A written request by the IRS
D.Normal course of business while opening an account on behalf of a client
Solution: The correct answer is C.
A written request by the IRS is not a court order.
A financial planner cannot give legal advice. However, they must have an understanding of how federal statutes impact non-traditional households since the majority of these laws fall under federal jurisdiction.
A.True
B.False
Solution: The correct answer is B.
This is a false statement. When in a non-traditional household, the planner and the clients need to understand the laws of the state in which the clients reside as well as federal law.
Your client, age 40, calls to inform you he was terminated today after getting written up for inappropriate behavior. He indicates he’s not upset or worried because of all the benefits he can fall back on; he asks you to clarify the specifics for him and help him get the ball rolling. You explain that he’ll likely qualify for:
A.Health insurance through COBRA where his firm continues covering the premium for up to 18 months.
B.Unemployment compensation through his state of residence up to 26 weeks.
C.Tax-free hardship withdrawals from his retirement plan.
D.None of the above
Solution: The correct answer is D.
COBRA offers the ability to extend the coverage; however, the firm does not typically cover the premium.
Unemployment benefits are not typically paid by states if the employee involuntarily leaves or is discharged for misconduct.
Job loss is not one of the circumstances that qualifies for hardship withdrawal. If the job loss leads to possible eviction or foreclosure, then he could take a hardship withdrawal; however, it would not be tax-free (it could be penalty-free).
Misaki purchased a house for $300,000. She put down 20% and financed the remainder over 30 years. Misaki’s interest rate on the mortgage is 7.5%. Her first payment is due on January 1. How much interest can Misaki deduct on her tax return for her first year of ownership?
A.$17,924.98
B.$1,857.54
C.$19,782.52
D.None of the Above
Solution: The correct answer is A.
Holly would like to plan for her daughter’s college education. She would like for her daughter, who was born today, to attend college for 5 years, beginning at age 18. Tuition is currently $15,000 per year and tuition inflation is 8%. Holly can earn an after-tax rate of return of 11%. How much must Holly save at the end of each year, if she wants to make the last payment at the beginning of her daughter’s first year of college?
A.$4,286.98
B.$4,629.94
C.$5,634.05
D.$5,748.11
Solution: The correct answer is C.
CF
CF0 0 enter
CF1 0 enter
F01 17 enter
C02 15,000
F02 5 enter
NPV
i = 1.11/1.08-1x100 = enter
down arrow
CPT
Answer: 43,391.3109
N = 18
I = 11
PV = 43,391.31
PMT = ? 5,634.05
FV = 0
Which of the following statements concerning financial aid programs for education funding is correct?
A.Qualified education expenses for the purpose of tax-free scholarships and fellowships include tuition and fees, room & board and course related expenses.
B.If a scholarship or fellowship is intended to compensate the recipient for teaching or research, then a portion may be included in taxable income.
C.Federal Pell Grants may be allocated towards living expenses.
D.Campus based aid is available to all students that meet the eligibility criteria.
Solution: The correct answer is C.
Qualified expenses do not include room and board.
If a scholarship or fellowship is intended for compensation, it is considered taxable income.
Campus based aid is allocated until it runs out; even if the student is eligible, they may not receive it.
All of the following statements concerning educational funding are correct EXCEPT:
A.Distributions from a Coverdell ESA in excess of qualified education expenses will be included in ordinary income.
B.Prepaid Tuition Plans are plans where prepayment of college tuition is allowed at a fixed price for enrollment in the future.
C.Employer provided education assistance is not taxable to the employee as long as it directly relates to the current job responsibilities.
D.The owner / contributor of a QTP has control of the account; the beneficiary is not entitled to make decisions.
Solution: The correct answer is C.
The education expenses may or may not be directly related to the employee’s current job duties; it depends on the employer’s policy. The reimbursement must also be less than the federal limit established and must only cover tuition, fees, books, supplies, and equipment.
You are a CFP® professional who has been approached by the CFO of a Fortune 500 Silky Industries Inc. (SI) to provide financial planning services to the top executives at SI. Your sister and brother have allocated 90% of their $1 million dollar retirement accounts to a mutual fund in which SI stock is the top holding. Can you accept this engagement?
A.No, because your integrity is impaired.
B.No, because your objectivity is impaired.
C.Yes, but only after proper disclosure.
D.Yes, because your integrity and objectivity are not impaired; no disclosure is needed
Solution: The correct answer is D.
Disclosure will not be required. The holdings are within a mutual fund in which they do not have control, and the family members are not material owners.
Darrin and Kathi recently gave you the following financial information. What is Darrin and Kathi’s Emergency Fund Ratio?
Current Assets: $14,634
Current Liabilities: $7,321
Monthly Non-Discretionary Expenses: $5,872
Yearly Income: $85,000
Annual Debt Expenses (excluding monthly housing costs): $20,624
A.0.710 month
B.1.896 months
C.2.492 months
D.4.121 months
Solution: The correct answer is C.
Current Assets / Monthly Non-discretionary Expenses = 14,634 / 5,872
Which of the following is not a form of discipline?
A.Private Censure
B.Mediation
C.Suspension
D.Public Censure
Solution: The correct answer is B.
The categories of Sanction include: Private Censure, Public Censure, Suspension, Revocation, and Interim Suspension.
Paul recently applied for CFP® Certification. Which of the following would be an absolute bar from certification?
A.Two or more personal or business bankruptcies.
B.Felony conviction for perjury last year.
C.Revocation of a Professional license such as attorney or real estate.
D.Felony conviction of assault four years ago.
Solution: The correct answer is D.
Felony conviction for violent crimes (other than murder or rape) are considered Conduct that results in an Absolute Bar. Conduct that is on this list will permanently bar the individual from becoming certified.
Which of the following is false regarding demand?
A.The average income or standard of living is a key determinant of demand.
B.Downward sloping demand indicates that if the price is decreased, the quantity demanded will increase.
C.A change in price for substitute or complement products will shift the demand curve in the same direction.
D.Demand represents the quantity consumers are willing to purchase of a good or service, at a particular price.
Solution: The correct answer is C.
The price of a substitute or complement product affects demand in the opposite manner. An increase in price of a substitute product and a decrease in the price of a complement product will shift the demand curve up and to the right.
Darrin and Kathi recently gave you the following financial information.
Current Liabilities $6,921
Monthly Non-discretionary Expenses $4,693
Yearly Income $90,000
Annual Debt Expenses (excluding monthly housing costs) $11,204
Which of the following lender thresholds will Darrin and Kathi meet assuming their monthly housing costs will be $1,660?
I. The 28% benchmark
II. The 36% benchmark
A.I only
B.II only
C.I and II
D.Neither I nor II
Solution: The correct answer is C.
28% Benchmark = 1,660 / (90,000/12) = 22.% YES
36% Benchmark = (1,660 + (11,204/12)) / (90,000/12) = 35% YES
A CFP® professional agrees to be bound by Continuing Education (CE) Requirements established by Certified Financial Planner Board of Standards. The CE Requirements for a regular continuing professional (not a new certificant or a certificant who has been inactive) are as follows:
A.30 hours of CE every year with 4 hours of CFP Board approved Ethics course.
B.30 hours of CE every two years with 4 hours of CFP Board approved Ethics course
C.30 hours of CE every year with 2 hours of CFP Board approved Ethics course
D.30 hours of CE every two years with 2 hours of CFP Board approved Ethics course.
Solution: The correct answer is D.
30 hours of CE every two years with 2 hours of CFP Board approved Ethics course.
If the Federal Reserve buys government securities, which of the following is likely to result from this action?
A.Increase interest rates.
B.Decrease interest rates.
C.Increase the reserve requirement.
D.Decrease the money supply.
Solution: The correct answer is B.
If the fed buys government securities, the money supply will increase and interest rates will decrease.
Joe, a CERTIFIED FINANCIAL PLANNER™ professional, has prepared financial statements and shared with the client that his insurance policy has lapsed. Which step in the financial planning process is he in?
A.Develop the Financial Planning Recommendations.
B.Analyzing the Client’s Current Course of Action and Potential Alternative Courses of Action
C.Understanding the Client’s Personal and Financial Circumstances.
D.Implement Financial Plan Recommendations.
Solution: The correct answer is B.
Analyzing the Client’s Current Course of Action and Potential Alternative Courses of Action. The insurance is being analyzed as the current course of action and to develop recommendations as to next steps.
Which of the following statements does not accurately describe a financial advisor’s communication with a client?
A.One of the main responsibilities of the advisor is to understand goals of the client through verbal and nonverbal communication.
B.Clarifying and restating a client’s statement is part of the process of feedback under reflective listening.
C.Closed questions are not useful in communications with a new client.
D.The feedback during active listening should not disrupt the speaker and should result in the speaker continuing to speak.
Solution: The correct answer is C.
In some situations, closed questions are preferable or necessary. A closed question seeks a response that is very specific and commonly involves an answer that can be accomplished with a single word or two.
Which of the following is not necessary to identify the client’s life cycle position?
A.Marital Status
B.Dependents
C.Profession
D.Net worth
Solution: The correct answer is C.
Age, marital status, dependents, income and net worth and employment status help determine a client’s life cycle position.
Which of the following statements are correct?
A 529 Plan is not considered an asset of the child for financial aid.
A PLUS loan is a loan for parents to pay for a child’s education, if they have not saved for college education but can afford loan re-payments.
Contributions to a Coverdell ESA are subject to annual limits, per contributor.
No contributions are permitted to a Coverdell beyond the beneficiary’s 18th birthday.
A.II and IV only
B.I, II and III only
C.III and IV only
D.I, II and IV only
Solution: The correct answer is D.
Statement III is false. The limit is per account, not per contributor.
Mary is a CFP® professional and is in the Analyzing the Client’s Current Course of Action and Potential Alternative Course(s) of Action step of the financial planning process. Mary is developing a capital needs analysis for her client and has established assumptions for tax rates, investment returns and inflation rates. Her client disagrees with Mary’s assumptions regarding inflation and other economic variables used in the retirement needs analysis calculation. What should Mary do next?
A.If Mary and her client are unable to agree on the assumptions used for the retirement capital needs analysis, Mary should limit the scope of the engagement and exclude retirement capital needs analysis from her recommendations.
B.Mary should use the assumptions that result in the most conservative recommendations for retirement funding.
C.The CFP Board’s Standards of Professional Conduct require Mary to disengage from the client.
D.Mary should provide her client with multiple projections, consistent with all varying assumptions.
Solution: The correct answer is A.
The best answer is A. Mary can continue with the client. The principle of integrity allows for differences of opinions with client relationships. However without the client and planner agreeing to an outcome Selecting and Implementing Actions, Products, or Services (Practice standard 6.d) would be inappropriate.
In engagements where financial planning services are to be provided, which of the following is not required to be put in writing in an agreement?
A.The client’s and the practitioner’s specific implementation responsibilities.
B.Scope of engagement with any limitations.
C.Time period of the agreement.
D.Method of communication.
Solution: The correct answer is A.
The specific implementation responsibilities will not be decided until step 6 of the financial planning process.
Professionals are required to objectively disclose seven elements of information regarding their process and compensation model when providing financial advice. Additional disclosures are required when providing financial planning; these obligations include confidentiality disclosures, time period of agreement, and scope of engagement along with any limitations.
(Duties Owed To Clients → 10. Provide Information to a Client).
When providing financial planning services to a client, everything must be disclosed in writing, EXCEPT:
A.Material conflicts of interest that may impact the CFP® professional’s ability to provide impartial advice.
B.The process of maintaining client confidentiality.
C.How the client pays for products, services and additional incurred costs including surrender charges and sales loads.
D.Disclosure of Economic Benefit for Referral or Engagement of Additional Persons.
Solution: The correct answer is A. Material conflicts of interest may be discussed orally or in writing.
B, C & D must be in writing when providing financial planning to a client (Duties Owed To Clients → 10. Provide Information to a Client).
