Lesson 1 Flashcards

1
Q

Knowledge Check

Your client Jed engaged you to help him with his financial situation. During the course of your meetings, you sold Jed a $1,000,000 life insurance policy. In which part of the financial planning process were you engaged when you sold Jed the policy?

A. Analyzing the Client’s Current Course of Action and Potential Alternative Course(s) of Action

B. Monitoring Progress and Updating

C. Developing the Financial Planning Recommendation(s)

D. Implementing the Financial Planning Recommendation(s)

A

D. Implementing the Financial Planning Recommendation(s)

By actually selling the insurance product, you have begun implementing the financial planning recommendation(s).

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2
Q

Knowledge Check

After meeting with your new client, Sid, you prepared his current financial statements. In which part of the financial planning process were you engaged when you prepared the statements?

A. Monitoring Progress and Updating

B. Implementing the Financial Planning Recommendation(s)

C. Analyzing the Client’s Current Course of Action and Potential Alternative Course(s) of Action

D. Developing the Financial Planning Recommendation(s)

A

C. Analyzing the Client’s Current Course of Action and Potential Alternative Course(s) of Action

Preparing financial statements is part of step 3 of the financial planning process, Analyzing the Client’s Current Course of Action and Potential Alternative Course(s) of Action.

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3
Q

Knowledge Check

At what point in time should the financial planner and the client identify their specific responsibilities?

A. When establishing the relationship

B. When analyzing the client’s current course of action

C. When developing the plan

D. When establishing goals and priorities

A

A. When establishing the relationship

The financial planner and the client should identify their responsibilities when they establish their relationship.

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4
Q

Knowledge Check

Which of the following stated goals of a client is most workable for financial planning purposes?

A. To get out of debt

B. To enjoy a comfortable retirement lifestyle

C. Of most importance, to purchase a vacation home within 5 years at a cost of about $100,000

D. To increase the amount of life insurance owned

A

C. Of most importance, to purchase a vacation home within 5 years at a cost of about $100,000

A workable goal for financial planning purposes should be specific, prioritized, and measurable, achievable, and realistic. Answer choices A, B, and D fail to meet these criteria.

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5
Q

Knowledge Check

Which of the following statements correctly describe(s) the regulatory environment for financial planners?

I. The U.S. Securities and Exchange Commission (SEC) is the primary regulatory authority of the financial planning profession.

II. Financial planners may elect to be regulated by federal or state regulatory authorities.

A. I only

B. II only

C. Both I and II

D. Neither I nor II

A

D. Neither I nor II

Depending on a variety of factors, including their business model and the number of assets they manage, financial planners are regulated at the state and/or the federal level. Many financial planners, particularly those working as independent registered investment advisers, are regulated by state securities agencies rather than by the SEC.

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6
Q

Knowledge Check

Which of the following statements correctly describes the fiduciary duty of financial planners?
I. CFP® professionals are always bound to the fiduciary duty when interacting with members of the public.

II. The fiduciary duty of financial planners demands they only make recommendations that are suitable.

A. Statement I

B. Statement II

C. Both statements

D. Neither statement

A

D. Neither statement

The fiduciary duty of financial planners demands that they put the interests of their clients ahead of their own interests. Making recommendations that are suitable is a feature of the less-stringent suitability standard. CFP® professionals are not always bound to the fiduciary standard; for example, they are only held to this standard when interacting with clients rather than members of the public.

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7
Q

Knowledge Check

Which of the following is (are) a benefit of working with a financial planner?

I. Decreased exposure to financial risk

II. Increased confidence in achieving one’s goals

A. I only

B. II only

C. Both I and II

D. Neither I nor II

A

C. Both I and II

Financial planners provide objective and competent recommendations that decrease their clients’ risk exposures and increase their confidence in achieving their goals.

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8
Q

Quiz

A CFP professional is the principal advisor for a registered investment adviser (RIA) firm that manages $50,000,000 in client assets and sells life insurance products. He is likely to be regulated by all the following regulatory bodies EXCEPT

A. The United States Securities and Exchange Commission (SEC).
B. A state insurance commission.
C. A state securities administrator.
D. The CFP Board.

A

A. The United States Securities and Exchange Commission (SEC).

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9
Q

Quiz

You are meeting with two of your clients, James and Marvin. During the meeting, they call their benefits office to adjust their tax withholding in a way that better suits their financial needs. In which part of the financial planning process are you engaged?

A. Analyzing the Client’s Current Course of Action and Potential Alternative Course(s) of Action

B. Monitoring Progress and Updating

C. Identifying and Selecting Goals

D. Understanding the Client’s Personal and Financial Circumstances

E. Implementing the Financial Planning Recommendation(s)

F. Presenting the Financial Planning Recommendation(s)

G. Developing the Financial Planning Recommendation(s)

A

E. Implementing the Financial Planning Recommendation(s)

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10
Q

Quiz

During which step of the financial planning process would a planner prepare and analyze financial statements?

A. Identifying and Selecting Goals

B. Understanding the Client’s Personal and Financial Circumstances

C. Analyzing the Client’s Current Course of Action and Potential Course(s) of Action

D. Developing the Financial Planning Recommendation(s)

A

C. Analyzing the Client’s Current Course of Action and Potential Course(s) of Action

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11
Q

Quiz

The benefits that accrue to a client from using a financial planner to prepare a financial plan include all the following EXCEPT:

A. The financial planner is subjective and knowledgeable.

B. A professional planner will include metrics in the financial plan.

C. A financial planner will identify risks in the process.

D. The use of a financial planner will provide the client with an increased awareness of opportunity costs.

A

A. The financial planner is subjective and knowledgeable.

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12
Q

Quiz

Which of the following is the appropriate standard of conduct for a fiduciary?

A. Act in the brokerage firm’s best interest.

B. Act as a prudent investor.

C. Act on a best-effort basis.

D. Act in self-interest.

A

B. Act as a prudent investor.

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13
Q

Exam

All the following statements regarding the fiduciary standard and CFP professionals are true EXCEPT:
Question 10 options:

A) The fiduciary standard requires putting the interests of one’s clients ahead of one’s own interests.

B) CFP professionals are bound to the fiduciary standard when providing financial advice.

C) CFP professionals are bound to the fiduciary standard when delivering general financial knowledge on television.

D) The fiduciary standard is more stringent than the suitability standard.

A

C. CFP professionals are bound to the fiduciary standard when delivering general financial knowledge on television.

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14
Q

Exam

One of your clients, Armand, has expressed interest in enrolling in a local college. He has asked you about ways in which he might fund his education. During a meeting, you provide him with three education saving plans from which to choose. In which part of the financial planning process are you engaged?
Question 9 options:

A) Analyzing the Client’s Current Course of Action and Potential Alternative Course(s) of Action

B) Monitoring Progress and Updating

C) Identifying and Selecting Goals

D) Understanding the Client’s Personal and Financial Circumstances

E) Implementing the Financial Planning Recommendation(s)

F) Presenting the Financial Planning Recommendation(s)

G) Developing the Financial Planning Recommendation(s)

A

F) Presenting the Financial Planning Recommendation(s)

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15
Q

Exam

You are meeting with two of your clients, James and Marvin. During the meeting, they call their benefits office to adjust their tax withholding in a way that better suits their financial needs. In which part of the financial planning process are you engaged?
Question 8 options:

A) Analyzing the Client’s Current Course of Action and Potential Alternative Course(s) of Action

B) Monitoring Progress and Updating

C) Identifying and Selecting Goals

D) Understanding the Client’s Personal and Financial Circumstances

E) Implementing the Financial Planning Recommendation(s)

F) Presenting the Financial Planning Recommendation(s)

G) Developing the Financial Planning Recommendation(s)

A

E) Implementing the Financial Planning Recommendation(s)

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16
Q

Exam

You meet with Geoffrey, a new client, who provides you with his tax returns from the previous year. In which part of the financial planning process are you engaged?

A) Analyzing the Client’s Current Course of Action and Potential Alternative Course(s) of Action

B) Monitoring Progress and Updating

C) Identifying and Selecting Goals

D) Understanding the Client’s Personal and Financial Circumstances

E) Implementing the Financial Planning Recommendation(s)

F) Presenting the Financial Planning Recommendation(s)

G) Developing the Financial Planning Recommendation(s)

A

D) Understanding the Client’s Personal and Financial Circumstances

17
Q

Exam

All the following are usually included in an engagement letter EXCEPT:

A) the defined parties to the agreement.

B) a description of the fees and costs.

C) the time horizon for the work to be completed.

D) a summary of the recommendations.

A

D) a summary of the recommendations.

18
Q

Exam

A CFP professional is the principal advisor for a registered investment adviser (RIA) firm that manages $50,000,000 in client assets and sells life insurance products. He is likely to be regulated by all the following regulatory bodies EXCEPT:

A) the United States Securities and Exchange Commission (SEC).

B) a state insurance commission.

C) a state securities administrator.

D) the CFP Board.

A

A) the United States Securities and Exchange Commission (SEC).

19
Q

Exam

Maxine Li has been a client of yours for almost a decade. In your quarterly meeting with Maxine, you evaluate her retirement portfolio performance and ensure that the expected amount of progress is being made. In which part of the financial planning process are you engaged?

A) Understanding the Client’s Personal and Financial Circumstances

B) Monitoring Progress and Updating

C) Implementing the Financial Planning Recommendation(s)

D) Developing the Financial Planning Recommendation(s)

A

B) Monitoring Progress and Updating

20
Q

Exam

Financial planners earn compensation in the form of

A) a percentage of assets managed.

B) an hourly rate or fee.

C) a commission on investment and insurance products sold.

D) all of the above.

A

D) all of the above.

21
Q

Exam

During a meeting with your client Cameron, you recommended that he purchase a personal liability umbrella policy (PLUP). In which part of the financial planning process were you engaged?

A) Implementing the Financial Planning Recommendation(s)

B) Presenting the Financial Planning Recommendation(s)

C) Identifying and Selecting Goals

D) Monitoring Progress and Updating

A

B) Presenting the Financial Planning Recommendation(s)

22
Q

Exam

All of the following are examples of qualitative information that should be collected by the financial planner EXCEPT:

A) the client’s general attitude about spending.

B) the client’s risk tolerance level.

C) the client’s age and number of children.

D) the client’s education goals.

A

C) the client’s age and number of children.

23
Q

End of Chapter Questions

Raven recently came to your office for her second appointment after receiving your engagement letter. During the meeting you collect several documents from her including her prior year tax returns, estate planning documents, and investment statements and history. You also worked with her on identifying and prioritizing her goals and objectives. Which of the following is the next step in the financial planning process?

A. Presenting the financial planning recommendations.

B. Analyzing the client’s current course of action and potential alternative courses of action.

C. Implementing the financial planning recommendations.

D. Developing the financial planning recommendations.

A

B. Analyzing the client’s current course of action and potential alternative courses of action.

During the planning process you have already established the relationship as well as gathered the
client data and identified and prioritized goals. Your next step is to analyze the client’s current course of action and potential alternative courses of action

24
Q

End of Chapter Questions

Your client, Jed, engaged you to help him with his financial situation. During the course of your meetings you sold Jed a $1,000,000 life insurance policy. Which part of the financial planning process were you engaged in?

A. Analyzing the client’s current course of action and potential alternative courses of action.

B. Monitoring progress and updating.

C. Developing the financial planning recommendations.

D. Implementing the financial planning recommendations.

A

D. Implementing the financial planning recommendations.

By actually selling the insurance product you are now implementing plan recommendations

25
Q

End of Chapter Questions

After meeting with your new client, Nala, you used a Monte Carlo simulation within your financial planning software to project the likelihood of meeting her retirement objective based on her current retirement plan contributions and investment portfolio allocation. Which part of the financial planning process were you engaged in?

A. Monitoring progress and updating.

B. Implementing the financial planning recommendations.

C. Analyzing the client’s current course of action and potential alternative courses of action.

D. Developing the financial planning recommendations.

A

C. Analyzing the client’s current course of action and potential alternative courses of action.

Use of available technology and tools such as Monte Carlo simulations to evaluate the client’s likelihood of meeting goals based on the current course of action is part of the analyzing the client’s current course of action and potential alternative courses of action step of the financial planning process.

26
Q

End of Chapter Questions

Thalmus, a local CFP® practitioner, recently met with one of his new clients, Merrell. During the course of the meeting Thalmus did the following things:

  1. Thalmus did not meet with Merrell until 10 minutes after the scheduled start time.
  2. In order to establish Merrell’s confidence in him, Thalmus told Merrell the names of several well
    known clients that currently do business with him.
  3. Thalmus asked Merrell several questions regarding Merrell’s family situation, hobbies, and
    activities.
    Which of these actions would be considered inappropriate?

a. 3 only.
b. 1 and 2.
c. 2 and 3.
d. 1, 2 and 3.

A

b. 1 and 2.

Asking questions about Merrell’s family situation, hobbies and activities are appropriate because they convey a genuine interest in the client. Starting the meeting late, regardless of the reason, is inappropriate. Listing clients is generally inappropriate. If the clients have given prior permission then it would be fine, but without such permission, a financial planner should not divulge the names or specific financial information of existing clients.

27
Q

End of Chapter Questions

Reverend Lola Pak, a prospective client, came to your office for the first time today. Which is the most appropriate way to greet her?

A. “Welcome to my office.”

B. “Welcome to my office, Ms. Pak.”

C. “Welcome to my office, Reverend Pak.”

D. “Welcome to my office, Lola.”

A

C. “Welcome to my office, Reverend Pak.”

You should always greet new clients with appropriate salutations. Since Lola is a Reverend you should identify her as such, even if you do not subscribe to her particular faith. Your goal is to make the client feel at ease with you and utilizing the client’s formal salutation will help you achieve this. If she encourages you to use her first name then you can do so after your initial meeting.