LO 1.1.1: Categorize the personal financial process according to the steps outlined in the CFP Board's Practice Standards

Question 1

Step 1

Answer 1

Understand the Client’s Personal and Financial Circumstnaces

Question 2

Main components to Step 1

Answer 2

Obtain qualitative and quantitative information

Analyzing information

Addressing incomplete information

Question 3

Quantitative information

Answer 3

AKA. objective data; is measurable or expressed as a quantity or number

Question 4

Qualitative information

Answer 4

AKA. subjective information; represents client’s individual traits, values, opinions, attitudes, and beliefs

Question 5

Addressing incomplete info means

Answer 5

1) . restrict scope of engagement for matters which sufficient info is avail -or-
2) . terminate the engagement

Question 6

Step 2

Answer 6

Identifying and selecting goals

Question 7

Main components to Step 2

Answer 7

Identifying potential goals

Selecting and prioritizing goals

Question 8

Financial goals should be quantified in

Answer 8

dollar amounts and established time frames

Question 9

Personal assumptions are based on

Answer 9

client-related variables

Question 10

Economic assumptions

Answer 10

based on economic-based data or performance (current and/or historic)

Question 11

Step 3

Answer 11

Analyzing Current Course and Potential Alternative Course(s)

Question 12

Main components of Step 3

Answer 12

Analyzing current course of action

Analyzing potential alternative courses of action

Question 13

Step 3: What must we analyze for both the current course and potential alternative courses of action

Answer 13

Material advantages and disadvantages of current course, and of each alternative

Whether each helps maximize the potential for meeting the client’s goals

Question 14

Step 4

Answer 14

Developing the Financial Planning Recommendation(s)

Question 15

Step 4: What to consider when making recommendations

Answer 15

RABIT:
for each Recommendation selected –
* Assumptions and estimates used
* Basis for making the recommendations
* Timing and priority of the recommendation
* whether recommendation is Independent or must be implemented with some other recommendation

Question 16

Step 5

Answer 16

Presenting the Financial Planning Recommendations

Question 17

Step 5: What well-prepared recommendations do

Answer 17

They will:

• 1. outline the problem and its potential consequences if left unaddressed (to arrive at solution, probs need to be understood)
• 2. provide a specific, actionable rec
• 3. detail a list of advantages and disadvantages
• 4. highlight second best alternative
• 5. document whether costs are within budget; or require budget adjustment

Question 18

Step 6

Answer 18

Implementing the Financial Planning Recommendations

Question 19

What actions must occur in Step 6 (Practice Standards)

Answer 19

• 1. addressing implementation responsibilities
• 2. identifying, analyzing, and selecting actions, products, and services
• 3. recommending actions, products, and services for implementation
• 4. selecting actions, products, or services

Question 20

Step 7

Answer 20

Monitoring Progress and Updating

Question 21

What actions must occur in Step 7 (Practice Standards)

Answer 21

• 1. monitoring and updating responsibilities
• 2. monitoring the client’s progress
• 3. obtaining current and qualitative and quantitative info
• 4. updating goals, recs, or implementation decisions

Question 22

What are the 7 steps of the Financial Planning Process

Answer 22

• 1. Understand the client situation;
• 2. Identify the appropriate goals;
• 3. Analyze the current course of action;
• 4. Develop recommendations;
• 5. Present;
• 6. Implement;
• 7. Monitor; ongoing process/update plan based on changes.