Lesson 1 Flashcards
Cynthia is a newly-minted CFP who has just started her career as an independent financial advisor.
Soon after taking on her first client, however, she realized that she could not provide informed
recommendations around property and casualty insurance. What might Cynthia do next to provide the
best service for her client?
A. Attain a property and casualty insurance license
B. Get advice from an experienced property and casualty insurance agent
C. Terminate her relationship with this client
D. Make her best effort at providing insurance recommendations
B. Get advice from an experienced property and casualty insurance agent
Financial planners are more likely to develop rapport with their client if they:
A. Understand their social styles and respond accordingly
B. Tell clients what their goals and needs should be
C. Showcase their expertise with sophisticated and verbose language
D. Develop a “one size fits all” approach to advising
A. Understand their social styles and respond accordingly
The first step in the formal financial planning process is:
A. Prospecting new clients
B. Monitoring recommendations
C. Gathering data
D. Establishing a relationship with a client
D. Establishing a relationship with a client
Which of the following statements regarding the use of assumptions in financial planning is most
accurate?
A. Advisors’ assumptions must not necessarily be legally defensible
B. It is preferable to base assumptions on future projections instead of historical data
C. It is preferable to be somewhat too conservative than to be somewhat too aggressive
D. Advisors have reached a consensus on most financial planning assumptions
C. It is preferable to be somewhat too conservative than to be somewhat too aggressive
During a meeting with his financial advisor, a client becomes very agitated after realizing how much
their bad financial decisions from the past are costing them now. If the advisor tries to relax the client
and focus on the present, they are engaging in:
A. Advising
B. Counseling
C. Directive interviewing
D. Non-directive interviewing
B. Counseling
In the context of comprehensive financial planning, tax planning means:
A. Minimizing clients’ current tax liabilities
B. Considering how the timing and form of transactions impacts all forms of taxation
C. Utilizing permanent life insurance to reduce estate taxes
D. Partnering with a CPA because tax planning is out of scope for financial planners
B. Considering how the timing and form of transactions impacts all forms of taxation
A reserved financial planner with an “analytical” social style has started working with an “expressive”
and “amiable” client. Their relationship is off to an uncomfortable start and their face-to-face meetings
are awkward. As their last meeting came to a close, the client remarked, “Hey, you need to lighten up
a bit! It’s like a funeral in here.” Based on this feedback, what might you recommend the planner do?
A. Terminate the relationship as different social styles don’t work well together
B. Adjust these meetings to be more relaxed and focus less on specific numbers
C. Invite another planner into the meeting to be the spokesperson
D. Avoid face-to-face meetings with this client and instead conduct all business over e-mail
B. Adjust these meetings to be more relaxed and focus less on specific numbers
Unlike advising, counseling is more likely to:
A. Provide quantitative data for use in developing recommendations
B. Help the client to meet their goals
C. Quickly and pointedly deliver recommendations to the client
D. Encourage the client to generate advice for themselves
D. Encourage the client to generate advice for themselves
Which of the following describes a best practice for prospecting new clients?
A. Identify your target market niche
B. Define your market as broadly as possible
C. Avoid cold calling or knocking on doors
D. Highlight your ability to advise on any financial difficulty
A. Identify your target market niche
While gathering client data, the use of a fact finder is beneficial because:
A. It directly includes the client in the data gathering process
B. It relies on client self-report
C. It is good for collecting qualitative information such as goals
D. Recommendations can be developed before the fact finder is finished
A. It directly includes the client in the data gathering process
Clients’ concerns are likely to be alleviated when a financial advisor:
A. Maintains an open body posture and a calm, unhurried pace
B. Speaks more often than the clients
C. Demurs when asked about fees and conflicts of interest
D. Interjects their expertise and knowledge while the client is speaking
A. Maintains an open body posture and a calm, unhurried pace
The comprehensive financial planning process is oriented around:
A. Implementing holistic recommendations
B. Generating revenue for the advisor and his or her firm
C. Solutions to clients’ financial problems
D. The client and his or her goals
D. The client and his or her goals
Which of the following statements regarding inflation in the context of financial planning is most
accurate?
A. Because they have such long careers left, inflation mostly affects young clients
B. Inflation has been higher recently than it was decades ago
C. The most appropriate inflation rate for the general costs of rural clients is the CPI-U
D. The CPI may not accurately reflect the inflation rate for medical or education costs
D. The CPI may not accurately reflect the inflation rate for medical or education costs
Unlike the single-purpose or the multi-purpose approaches to financial planning, the comprehensive
approach
A. bounds advisors to a fiduciary standard.
B. follows the seven-step financial planning process.
C. considers clients’ holistic financial and life situations.
D. covers multiple topics and goals.
C. considers clients’ holistic financial and life situations.
Winston, a financial advisor, just finished a phone call with Eve, who just agreed to become his client.
During that call, Eve explained that she wants guaranteed income for life. Winston is already sure she
needs a single life annuity and has started drafting the necessary paperwork. Based on this information,
Winston’s next step should be to:
A. Continue as planned because a single life annuity will meet her goal
B. Wait until he has gathered more data about his new client
C. Consider alternatives such as deferred and survivorship annuities
D. Insist on a comprehensive engagement rather than a single-purpose approach
B. Wait until he has gathered more data about his new client
