Module 1 - Quiz

Question 1

A client is looking for help in getting his financial situation in order. As such, he is seeking guidance in all areas of financial planning. He is in need of what type of planning?

Targeted planning, Investment planning, Comprehensive planning, Retirement planning

Answer 1

Comprehensive planning - Comprehensive planning provides guidance in all areas of financial planning.

Question 2

Personal financial planning is…

Answer 2

a coordinated, continuous process

Question 3

Which one of the following terms does not describe the financial planning process?

Coordinated
Dynamic
Integrated
Static

Answer 3

Static - Financial planning is a dynamic, not static, process.

Question 4

Which one of the following is a characteristic of properly stated financial goals?

General
Flexible
Short Term
Definite

Answer 4

Definite - Financial goals should be definite in terms of purpose, time frames, and dollar amounts.

Question 5

**The primary reason a financial goal needs to be measurable is so that it can be…

Achieved
Monitored
Changed
Prioritized

Answer 5

Monitored - A financial goal needs to be measurable so that it can be monitored.

Question 6

Is this a correctly stated financial goal? If not, what’s missing that would make it a correctly stated goal?

To accumulate $40,000 in five years for a down payment on a house.

Answer 6

Yes

Question 7

Is this a correctly stated financial goal? If not, what’s missing that would make it a correctly stated goal?

To accumulate funds within the next 10 years for college expenses for a child.

Answer 7

No - missing amount

Question 8

Is this a correctly stated financial goal? If not, what’s missing that would make it a correctly stated goal?

To set aside 10% of income for the purpose of replacing the automobile currently owned.

Answer 8

No - missing amount and time

Question 9

Is this a correctly stated financial goal? If not, what’s missing that would make it a correctly stated goal?

To invest $5,000 a year for retirement.

Answer 9

No - missing time

Question 10

The current yield from already invested assets is first identified in which of the following steps in the financial planning process?

1) Understanding the client’s personal and financial circumstances
2) Analyzing the client’s current course of action and potential alternate course(s) of action
3) Developing the financial planning recommendations
4) Implementing the financial planning recommendations

Answer 10

1) Understanding the client’s personal and financial circumstances

Gathering client data is part of understanding the client’s personal and financial circumstances which includes gathering quantitative date like the current yield from invested assets. This is usually obtained from a recent account statement.

Question 11

Asset categories that are appropriate for the client are determined in which one of the following steps in the financial planning process?

1) Understanding the client’s personal and financial circumstances
2) Analyzing the client’s current course of action and potential alternate course(s) of action
3) Developing the financial planning recommendations
4) Implementing the financial planning recommendations

Answer 11

3) Developing the financial planning recommendations

During the developing financial planning recommendations step, the planner determines the appropriate asset categories for the client’s objectives, time horizon, and so on.

Question 12

A periodic review of the performance of a client’s investments is done in which of the following steps of the financial planning process?

1) Understanding the client’s personal and financial circumstances
2) Analyzing the client’s current course of action and potential alternate course(s) of action
3) Developing the financial planning recommendations
4) Monitoring progress and updating

Answer 12

4) Monitoring progress and updating

During the monitoring progress and updating step, the planner periodically reviews the performance of a client’s investments.

Question 13

Identifying potential problems that might interfere with a client achieving his or her objectives is done in which one of the following steps in the financial planning process?

1) Understanding the client’s personal and financial circumstances
2) Analyzing the client’s current course of action and potential alternate course(s) of action
3) Developing the financial planning recommendations
4) Implementing the financial planning recommendations

Answer 13

2) Analyzing the client’s current course of action and potential alternate course(s) of action

During the analyzing the client’s current course of action and potential alternate course(s) of action step, the planner identifies strengths and weaknesses, and potential problems that might interfere with a client achieving his or her objectives.

Question 14

Which one of the following would not be considered quantitative data?

1) Health status
2) Education funding needs
3) Copies of important documents

Answer 14

1) Health status

Health status relates to quality of life, and is qualitative data.

Question 15

Knowledge that a financial planner wants when creating a financial plan would include

1) How cash equivalents for an emergency fund are to be managed
2) The investment strategies acceptable to the client
3) The insurance needs of the client
4) All of the above

Answer 15

4) All of the above

Among other things, the financial planner would want to know how cash equivalents for an emergency fund are to be managed, the investment strategies acceptable to the client, and the insurance needs of the client.

Question 16

Which of the seven steps of the financial planning process follows the developing the financial planning recommendations step?

1) Presenting the financial planning recommendations
2) Analyzing the client’s current course of action and potential alternate course(s) of action
3) Implementing the financial planning recommendations

Answer 16

1) Presenting the financial planning recommendations

After developing appropriate recommendations, presenting them to the client follows in the planning process.

Question 17

Which one of the following is the best description of a fiduciary?

1) Making sure you know your customer and all investments are suitable
2) Always putting the best interests of the client first
3) Always looking out for the interested of the client

Answer 17

2) Always putting the best interests of the client first

A fiduciary always puts the best interests of the client first, ahead of his or her own interests.

Question 18

It is generally recommended by planners that an emergency fund be established. Which of the following guidelines is recommended?

1) one to three months of living expenses in liquid investments
2) three to six months of living expenses in liquid investments
3) three to six months of living expenses in either liquid investments or available on credit

Answer 18

2) three to six months of living expenses in liquid investments

For an emergency fund, three to six months of living expenses in liquid investments is suggested.

Question 19

Is this a correctly stated financial goal? If not, what’s missing that would make it a correctly stated goal?

To make money in the stock market.

Answer 19

No - missing amount and time

Question 20

Is this a correctly stated financial goal? If not, what’s missing that would make it a correctly stated goal?

To accumulate $10,000 for a new automobile.

Answer 20

No - missing time

Question 21

Is this a correctly stated financial goal? If not, what’s missing that would make it a correctly stated goal?

To accumulate sufficient money for a down payment on a house in five years.

Answer 21

No - missing amount

Question 22

Is this a correctly stated financial goal? If not, what’s missing that would make it a correctly stated goal?

To accumulate $500,000, by starting to save today, for retirement in 20 years.

Answer 22

Yes

Question 23

Limited resources is the main reason for…

1) Quantifying goals
2) Identifying goals
3) Prioritizing goals

Answer 23

3) Prioritizing goals

Prioritizing goals will serve to make the correct choice or decision when available resources are limited.

Question 24

Which one of the following is not a requirement of a properly stated goal?

1) Justification
2) Purpose
3) Amount

Answer 24

1) Justification

A well-written goal has “PTA”: purpose, time frame, and amount. Clients have goals for various reasons; they do not need to justify them.

Question 25

Which one of the following is not an important and necessary component of any profession?

1) Ethics
2) Body of knowledge
3) Retirement plan

Answer 25

3) Retirement plan

Correct—this is not a vital component as are having a code of ethics and having an agreed upon body of knowledge within the industry.

Question 26

**In examining retirement plan issues, which of the following should be considered?

1) retirement income desired
2) legal limitations on how much can be contributed for tax-qualified investing
3) general investment constraints (such as what investments are available)
4) all of the above

Answer 26

4) all of the above

The retirement income desired, the legal limitations for tax qualified investing, and general investment constraints are all considerations when examining retirement plan issues.

Question 27

Which one of the following is a correct statement about financial planners?

1) Anyone using the title of “financial planner” must be a financial planner by law.
2) All financial planners offer comprehensive financial planning.
3) It is up to clients to determine whether someone using the title of “financial planner” is really a financial planner or not.

Answer 27

3) It is up to clients to determine whether someone using the title of “financial planner” is really a financial planner or not.

There are currently no regulations or laws restricting the use of the title of financial planner. Unfortunately, there are individuals who use this title for marketing purposes and are not really financial planners but primarily sell various products.

Question 28

Which one of the following Financial Paraplanner Qualified Professional Standards of Professional Conduct match the standard with the correct definition?

1) Integrity— Maintain an adequate level of knowledge and skill and effectively apply that knowledge while recognizing its limitations.
2) Competence—provide professional services with integrity, honor, fairness, and dignity, and maintain client trust and confidence.
3) Confidentiality—keep client information confidential, disclosing only when authorized or compelled by law.

Answer 28

3) Confidentiality—keep client information confidential, disclosing only when authorized or compelled by law.

Question 29

Which one of the following may be required to register with the SEC?

1) Federal tax preparer
2) Insurance broker
3) Investment advisor

Answer 29

3) Investment advisor

Registered investment advisers with assets under management of over $100 million must be registered with the SEC.

Question 30

T/ F - Oftentimes one of the most valuable services that a financial planner can offer is to help the client ask the right questions.

Answer 30

True - Oftentimes clients may not even know the right questions to ask. A good planner helps the client in framing the right questions, and then working with them to find answers and solutions.

Question 31

T/F - The most valuable service that a financial planner can offer is investing a client’s assets in products for them, and not having to bother them with explanations of how they work.

Answer 31

False - Clients should be educated and understand their investments, and the risk they are taking. It is the role of the financial planner to provide this education.

Question 32

T/F - One of the most valuable services that a financial planner can offer is establishing and setting goals for the client.

Answer 32

False - It is up to the client to establish their own goals—the planner is there to help and educate.

Question 33

Which one of the following is especially important when dealing with estate planning for a client?

1) the amount of money in an emergency fund
2) the titling of assets and property
3) the income tax bracket of the client

Answer 33

2) the titling of assets and property

The titling of an asset determines who has control, and who will ultimately inherit the asset or if it will go through the probate estate.

Question 34

T/F - A truly professional financial planner is able to carry out comprehensive financial planning without the help of others.

Answer 34

False - Even though a financial planner should have enough knowledge to effectively help the client, he or she will often rely on the help of others, such as Paraplanners, attorneys, CPAs, and money managers.

Question 35

T/F - Comprehensive financial planners do not need extensive knowledge since they can delegate most everything out to specialists.

Answer 35

False - Planners who carry out comprehensive financial planning need to have enough knowledge so that any recommendations or guidance they are giving to clients is sound and justified.

Question 36

T/F - With financial planning it often becomes necessary to use other professionals to effectively serve a client.

Answer 36

True - This is true, as the planner cannot be an expert in everything. Generally the higher the net worth of the client, the more advisers they may use (such as a financial planner, accountant, and attorney).

Question 37

Which of the following designations or certifications is best suited for an assistant working with a financial planner?

1) CIMA
2) MPAS
3) FPQP
4) CFA

Answer 37

3) FPQP

Question 38

Which of the following is not a major responsibility of a fiduciary?

1) to act with utmost good faith
2) to relieve the client of making major decisions
3) to not mislead clients
4) to provide full and adequate disclosure of all material facts

Answer 38

2) to relieve the client of making major decisions

The role of a fiduciary is not to relieve the client of making major decisions, but to help and educate the client about his or her choices, and to present alternatives that the fiduciary believes to be in the best interest of the client.

Question 39

T/F - A Financial Paraplanner Qualified Professional™ designee shall maintain objectivity and impartiality with respect to services rendered and advice given.

Answer 39

True - This is the standard of objectivity from the Financial Paraplanner Qualified Professional™ Standards of Professional Care.

Question 40

T/F - A Financial Paraplanner Qualified Professional™ designee needs to be ethical, but does not need to abide by a specific code of ethics.

Answer 40

False - Financial Paraplanner Qualified Professional™ designees must abide by a code of ethics.

Question 41

A Financial Paraplanner Qualified Professional™ shall provide professional services with integrity, honor, fairness, and dignity, and maintain client trust and confidence.

Answer 41

True - This is the standard of integrity from the Financial Paraplanner Qualified Professional™ Standards of Professional Care.

Question 42

T/F - Goals need be clearly stated and defined only as to purpose and amount.

Answer 42

False - This is an incorrect statement. Decision-making is ultimately up to the client, not the planner. The planner’s role is to educate and provide possible solutions and recommendations.

Question 43

T/F - A major role of a financial planner is to take the burden of decision making off of the shoulders of the client.

Answer 43

False - Decision-making is ultimately up to the client, not the planner. The planner’s role is to educate and provide possible solutions and recommendations.

Question 44

T/F - Data gathering for a financial planning engagement includes both quantitative and qualitative data.

Answer 44

True - Data gathering for a financial planning engagement does include both quantitative and qualitative data.