Lesson 1 Flashcards
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)
D. Implementing the Financial Planning Recommendation(s)
By actually selling the insurance product, you have begun implementing the financial planning recommendation(s).
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)
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.
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. When establishing the relationship
The financial planner and the client should identify their responsibilities when they establish their relationship.
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
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.
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
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.
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
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.
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
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.
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. The United States Securities and Exchange Commission (SEC).
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)
E. Implementing the Financial Planning Recommendation(s)
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)
C. Analyzing the Client’s Current Course of Action and Potential Course(s) of Action
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. The financial planner is subjective and knowledgeable.
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.
B. Act as a prudent investor.
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.
C. CFP professionals are bound to the fiduciary standard when delivering general financial knowledge on television.
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)
F) Presenting the Financial Planning Recommendation(s)
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)
E) Implementing the Financial Planning Recommendation(s)