Module 5 Professional Conduct and Fiduciary Responsibility

Question 1

A CFP® professional must comply with the Practice Standards when the CFP® professional agrees to provide or provides Financial Advice that requires

A)
specialists for implementation of the Client’s recommendations.
B)
fiduciary oversight.
C)
development of an IPS.
D)
integration of relevant elements of the Client’s personal and/or financial circumstances.

Answer 1

The answer is integration of relevant elements of the Client’s personal and/or financial circumstances. According to the Code and Standards, a CFP® professional must comply with the Practice Standards when

the CFP® professional agrees to provide or provides
Financial Planning; or
Financial Advice that requires integration of relevant elements of the Client’s personal and/or financial circumstances in order to act in the Client’s best interests (“Financial Advice that Requires Financial Planning”); or
the Client has a reasonable basis to believe the CFP® professional will provide or has provided Financial Planning.
LO 5.1.1

Question 2

Select the Code of Ethics principle that a CFP® professional upholds by acting without regard to the personal motives and interests of the firm, and any individual or entity other than the Client.

A)
Exercise due care.
B)
Act with honesty, integrity, competence, and diligence.
C)
Act in a manner that reflects positively on the financial planning profession and CFP® certification.
D)
Act in the client’s best interests.

Answer 2

The answer is act in the client’s best interests. By acting without regard to the personal motives and interests of the firm, and any individual or entity other than the client, a CFP® professional is following this Code of Ethics principle: “Act in the client’s best interests.”

LO 5.1.2

Question 3

Select the Standard of Conduct (Duties Owed to Clients) that requires a CFP® professional to provide a Client with accurate information, in accordance with the Engagement, and in response to reasonable Client requests, in a manner and format that a Client reasonably may be expected to understand.

A)
Diligence (Standard A.4)
B)
Duties When Communicating With a Client (Standard A.11)
C)
Professionalism (Standard A.7)
D)
Integrity (Standard A.2)

Answer 3

Duties When Communicating With a Client (Standard A.11) requires a CFP® professional to provide a Client with accurate information, in accordance with the Engagement, and in response to reasonable Client requests, in a manner and format that a Client reasonably may be expected to understand.

LO 5.1.3

Question 4

When a client-planner engagement involves Financial Advice for which Financial Planning is required, and the client agrees to enlist the planner for services, the Planner must abide by

the Fiduciary Duty.
the Code of Ethics.
the Practice Standards for the Financial Planning Process.
the Suitability Standard.
A)
II and III
B)
I and IV
C)
I only
D)
I, II, and III

Answer 4

The answer is I, II, and III. Statement IV is incorrect; the suitability standard is not required to be upheld in engagements where Financial Planning is required and the client engages the planner’s services.

LO 5.1.1

Question 5

According to CFP Board’s Standards of Professional Conduct, which one of the following is not expected to be disclosed in writing to a client at the time a client-planner relationship is established?

A)
Resumes of principals and employees of a firm who are likely to provide financial planning services to the client
B)
A statement of the basic philosophy of the CFP® certificant (or firm) in working with clients
C)
A statement as to the method of compensation for the CFP® certificant
D)
A statement of all sources of income for the CFP® certificant

Answer 5

The answer is a statement of all sources of income for the CFP® certificant. A CFP® certificant is expected to provide a substantial amount of information to clients; however, all sources of income are not relevant to the relationship. A planner receiving dividends or interest, alimony or child support payments, is under no obligation to disclose that information to clients. A statement of compensation related to the planning practice is appropriate and expected.

LO 5.2.1

Question 6

If CFP Board Counsel finds no probable cause following an investigation, CFP Board Counsel must do all of these except

A)
indicate that the matter requires no further action at this time.
B)
provide a settlement offer.
C)
dismiss the investigation.
D)
reserve the right to reopen the investigation in the future.

Answer 6

The answer is provide a settlement offer. If CFP Board Counsel finds no probable cause, CFP Board Counsel must dismiss the investigation as not warranting further action at this time, while reserving the right to reopen the investigation in the future. A settlement offer is an option only if probable cause exists.

LO 5.2.2

Question 7

To which of the following individuals do CFP Board’s Fitness Standards apply?

A)
Denise, who has only been in the financial services industry for four years and earned her CFP® certification seven years ago
B)
Christopher, a practicing financial planner who has been a CFP® certificant for over 20 years
C)
Andrea, who recently completed the CFP® exam and is applying for CFP® certification
D)
Edgar, a home office employee who earned his CFP® certification seven years ago

Answer 7

The answer is Andrea, who recently completed the CFP® exam and is applying for CFP® certification. CFP Board’s Fitness Standards apply a person who recently completed the CFP® exam and is applying for CFP® certification.

LO 5.2.1

Question 8

All of the following statements comprise the Fiduciary Duty, Duty of Loyalty, except

A)
place the interests of the Client above the interests of the CFP® professional and the CFP® Professional’s Firm.
B)
act without regard to the financial or other interests of the CFP® professional, the CFP® Professional’s Firm, or any individual or entity other than the Client.
C)
comply with the terms of the Client engagement and follow all directions of the Client that are reasonable and lawful.
D)
avoid Conflicts of Interest, or fully disclose Material Conflicts of Interest to the Client, obtain the Client’s informed consent, and properly manage the conflict.

Answer 8

The answer is comply with the terms of the Client engagement and follow all directions of the Client that are reasonable and lawful. “Act with the care, skill, prudence, and diligence that a prudent professional would exercise” is a statement found in the Fiduciary Duty, Duty of Care, NOT the Duty of Loyalty.

LO 5.1.4

Question 9

Identify the Integration Factors that indicate a Financial Planning Engagement is occurring.

The number of relevant elements of the Client’s personal and financial circumstances that the Financial Advice may affect
The portion and amount of the Client’s Financial Assets that the Financial Advice may affect
The effect on the Client’s overall exposure to risk if the Client implements the Financial Advice
The length of time the Client’s personal and financial circumstances may be affected by the Financial Advice
A)
I, II, III, and IV
B)
III and IV
C)
I and II
D)
I only

Answer 9

The answer is I, II, III, and IV. All of these are Integration Factors that help a planner determine whether Financial Planning is occurring.

LO 5.1.1

Question 10

One of your colleagues, who is also a CFP® certificant, has been brought before CFP Board for disciplinary action based on a number of client complaints purporting rather egregious behavior on the part of this practitioner. Within the structure of the Disciplinary Procedures of CFP Board, under Forms of Discipline, there are several options available. Based on the fact that grounds for discipline have been established, which of the following forms of discipline would be considered to be the most severe for your colleague to receive?

A)
Revocation
B)
Private censure
C)
Suspension
D)
Public letter of admonition

Answer 10

The answer is revocation. Within the structure of Article 4 of Disciplinary Procedures of CFP Board, under Forms of Discipline, where grounds for discipline have been established, revocation is the most severe as it is generally permanent in nature and often accompanied by a related press release designed to inform the public of this action.

LO 5.2.2

Question 11

Identify the item that is NOT included in the Duties Owed to CFP Board section of the Standards of Conduct.

A)
Compliance with the Terms and Conditions of Certification and License.
B)
Report incidents involving adverse conduct to CFP Board within 45 days.
C)
Provide a narrative statement to CFP Board on reportable matters.
D)
Cooperation with CFP Board throughout investigations and disciplinary proceedings.

Answer 11

The answer is report incidents involving adverse conduct to CFP Board within 45 days. To comply with the Duties Owed to CFP Board section of the Standards of Conduct, a CFP® professional must report incidents involving adverse conduct to CFP Board within 30 days.

LO 5.1.3

Question 12

George is a CFP® certificant who recently violated the ethical standards set forth by the CFP Board. Which of the following is not a possible form of discipline?

A)
Suspension
B)
Private censure
C)
Client censure
D)
Public letter of admonition

Answer 12

The answer is client censure. Article 4 of the CFP Board’s Disciplinary Rules and Procedures lists four forms of discipline: private censure, public letter of admonition, suspension, and revocation. Client censure is not an accepted form of discipline.

LO 5.2.2

Question 13

Identify the principle of the Code of Ethics to which a CFP® professional is adhering by having firm adopted and implemented policies regarding the protection, handling, and sharing of the Client’s nonpublic personal information.

A)
Avoid or disclose and manage conflicts of interest.
B)
Act with honesty, integrity, competence, and diligence.
C)
Act in the client’s best interests.
D)
Maintain the confidentiality and protect the privacy of client information.

Answer 13

The answer is maintain the confidentiality and protect the privacy of client information. The CFP® professional’s implementation of rules to protect, handle, and share nonpublic client information aligns best with Code of Ethics principle 5: “Maintain the confidentiality and protect the privacy of client information.”

LO 5.1.2

Question 14

Analyzing the client’s current course of action and potential alternative course(s) of action is one of the stages of the personal financial planning process. Which of these tasks typically are completed in this stage?

Determining if the current course maximizes the potential to meet client goals
Identifying material advantages and disadvantages
Recommending specific tax strategies
Identifying how each alternative integrates relevant elements
A)
I, II, and IV
B)
I and II
C)
I and III
D)
III and IV

Answer 14

The answer is I, II, and IV. Recommending specific tax strategies follows this step—Step 4. Developing the Financial Planning Recommendation(s).

LO 5.1.3

Question 15

Select the relevant element.

A)
Identify and manage risks
B)
Refrain from lending money to clients
C)
Specify goals that are unrealistic
D)
Providing a letter of engagement to a Client

Answer 15

The answer is identify and manage risks. Relevant elements are the components of the Client’s personal and financial circumstances that the Financial Advice may affect. Relevant elements vary from Client to Client depending on goals, needs, and overall circumstances. Identifying and managing risks is a relevant element.

LO 5.1.1

Question 16

The Code and Standards defines Financial Advice as “communication that would reasonably be viewed as a recommendation that the Client take or refrain from taking a particular course of action with” based on its

content.
context.
concept.
presentation.
A)
III and IV
B)
I, II, III, and IV
C)
I, II, and IV
D)
I and IV

Answer 16

The answer is I, II, and IV. The Glossary of the Code and Standards defines Financial Advice as “communication that, based on its content, context, and presentation, would reasonably be viewed as a recommendation that the Client take or refrain from taking a particular course of action with.”

LO 5.1.1

Question 17

“A CFP® professional may not do indirectly, or through or by another person or entity, any act or thing that the Code and Standards prohibit the CFP® professional from doing directly.” This statement is included in which of the Standards of Conduct?

A)
Duties Owed to Firms and Subordinates
B)
Prohibition on Circumvention
C)
Duties to CFP Board
D)
Duties Owed to Clients

Answer 17

The answer is Prohibition on Circumvention. Under the Standards of Conduct, this statement identifies Prohibition on Circumvention.

LO 5.1.3

Question 18

Identify requirements of communications as set forth in Standard A.11, Duties When Communicating with a Client.

Provide information in response to reasonable client requests
Provide a client with accurate information
Provide information in a manner and format that a client reasonably could be expected to understand
Provide in accordance with the terms of the engagement
A)
II, and III
B)
IV only
C)
I, II, III, and IV
D)
I and II

Answer 18

The answer is I, II, III, and IV. Duties When Communicating With a Client (Standard A.11): A CFP® professional must provide a client with accurate information in a manner and format that a client reasonably could be expected to understand. The information must be provided in accordance with the terms of the Engagement (the oral or written agreement, arrangement, or understanding between the CFP® professional and the client) and in response to reasonable client requests.

LO 5.1.3

Question 19

Per the Fitness Standards, identify the conduct under which an individual is eligible to submit a petition for consideration.

A)
Revocation of a financial professional license
B)
Felony conviction for tax fraud or other tax-related crimes
C)
Two or more personal or business bankruptcies
D)
Felony conviction for any other violent crime within the last five years

Answer 19

The answer is two or more personal or business bankruptcies. An individual with two or more personal or business bankruptcies would receive a presumptive bar, according to the guidelines of the Fitness Standards. Conduct leading to a presumptive bar is eligible for a petition for consideration.

LO 5.2.1

Question 20

Standard A.1 states that at all times when providing Financial Planning to a Client, a CFP® professional must act as a fiduciary and, therefore, act in the best interests of the client. Identify the circumstances under which the Code of Ethics principle to “Act in the client’s best interests” must be upheld.

A)
When providing Financial Advice that requires Financial Planning
B)
When providing Financial Planning
C)
At all times
D)
When providing Financial Advice

Answer 20

The answer is at all times. The introduction to the Code of Ethics and Standards of Conduct states, “The Code of Ethics applies at all times, and sets forth principles that guide the behavior of CFP® professionals, with elaboration provided in the Standards.”

LO 5.1.1

Question 21

The CFP Board Code of Ethics and Standards of Conduct prohibits a CFP® certificant from doing which of these activities?

Commingling client funds with funds of the financial planning firm
Misleading a client
Accepting any consideration (e.g., gift, gratuity) that might compromise the planner’s objectivity
Using the initials RIA after his or her name
A)
I, II, and IV
B)
II and III
C)
I and IV
D)
I, II, III, and IV

Answer 21

The answer is I, II, III, and IV. A CFP® certificant may not commingle client funds with the funds of the financial planning firm and may not mislead a client. The CFP Board Standards of Conduct, Duties Owed to Clients, Standard A.6 (Sound and Objective Professional Judgement) prohibits accepting any consideration that might compromise the planner’s objectivity. The use of the initials RIA after one’s name is governed (and prohibited) by the SEC and by CFP Board.

Question 22

What exists when a CFP® professional performs any type of mutually agreed-upon financial planning service for a client?

A)
A quantitative analysis
B)
A financial plan
C)
An implementation agreement
D)
A financial planning engagement

Answer 22

The answer is a financial planning engagement. A financial planning engagement exists when a CFP® professional and the client mutually agree upon the services to be offered by the CFP® professional. The CFP® professional performs a service pursuant to this agreement.

LO 5.1.1

Question 23

“A CFP® professional may not engage in conduct that reflects adversely on his or her integrity or fitness as a CFP® professional, upon the CFP® marks, or upon the profession.” This statement is included in which of the Standards of Conduct?

A)
Duties Owed to CFP Board
B)
Prohibition on Circumvention
C)
Duties Owed to Firms and Subordinates
D)
Duties Owed to Clients

Answer 23

The answer is Duties Owed to CFP Board. Under the Standards of Conduct, this statement identifies Duties Owed to CFP Board.

LO 5.1.3

Question 24

Which one of these is the highest level of responsibility an adviser can have to a client?

A)
Recommending suitable products as solutions
B)
Adviser
C)
Trusted friend
D)
Fiduciary

Answer 24

The answer is fiduciary. The highest level of responsibility an adviser can have to a client is that of fiduciary, which requires the adviser to always put the client’s needs first.

LO 5.1.3

Question 25

You have been working closely with David and Denise as their financial planner for the last four years. You just read in the paper that they became parents for the first time. Most importantly, you should

A)
recommend additional life insurance.
B)
provide them with a college funding planner.
C)
send a baby gift.
D)
suggest an appointment to completely review their financial plan in light of the new arrival.

Answer 25

The answer is suggest an appointment to completely review their financial plan in light of the new arrival. With no other information, it would be premature to make any specific recommendations at this time. The addition of a child to a family, especially a first child, changes perspectives on many things. Any existing financial plan is likely to need a substantial revision following this event. The baby gift would be a nice gesture, too.

LO 5.1.3

Question 26

You are a CFP® certificant, and as an integral part of your financial planning business expansion plan, you have recently employed a young woman who is eminently qualified as a paraplanner and is currently studying for the CFP® Certification Examination. However, you notice that she is using the CFP® mark after her name already. Which of the following should you do?

A)
Report her immediately to CFP Board
B)
Terminate her employment immediately.
C)
Advise her to cease using the mark immediately.
D)
Do nothing, because she is not a CFP® certificant.

Answer 26

The answer is report her immediately to CFP Board. Although it might seem easier and appear to be a kinder option to simply advise her to stop using the marks, as a CFP® practitioner you are under obligation to CFP Board to immediately advise the Board of any misuse of the marks. Once reported it is possible, as indicated within the Guide to Use of the Marks, that CFP Board will take action to prevent her from using the marks in the future.

LO 5.2.2

Question 27

According to the Code and Standards, Standard A.1, Fiduciary Duty, must be upheld

A)
at all times when providing Financial Advice.
B)
throughout every client interaction.
C)
at all times.
D)
anytime a financial topic is discussed with a current or prospective client.

Answer 27

The answer is at all times when providing Financial Advice. Per the Code and Standards, “at all times when providing Financial Advice to a Client, a CFP® professional must act as a fiduciary and, therefore, act in the best interests of the Client.” (Standard A.1.)

LO 5.1.4

Question 28

Choose a nonfinancial professional license defined in the Fitness Standards.

A)
Real Estate
B)
Insurance
C)
Accountant
D)
Registered Securities Representative

Answer 28

The answer is Real Estate. The Fitness Standards provides two examples of nonfinancial professional licenses, real estate, and attorney.

LO 5.2.1

Question 29

Reinstatement is possible under all of these circumstances except

A)
revocation.
B)
suspension of one year or less.
C)
suspension of more than one year.
D)
temporary bar of more than one year.

Answer 29

The answer is Revocation. Revocation is permanent. There will be no opportunity for reinstatement.

LO 5.2.2

Question 30

Recently, Bruce, a CFP® certificant, was convicted of illegal possession of narcotics. What is Bruce required to do?

A)
Do nothing, as nothing is required by the Code of Ethics.
B)
Report the conviction to the CFP Board, as required by the Standards of Professional Conduct.
C)
Contact his clients and confess the conviction.
D)
Terminate his professional client-planner relationships.

Answer 30

The answer is report the conviction to the CFP Board, as required by the Standards of Professional Conduct. The Rules of Conduct require a CFP® certificant to report any conviction of a crime to CFP Board (Rule 6.4). There is no requirement for contacting clients or terminating the relationship.

LO 5.2.1

Question 31

Choose the definition of “financial planning” that is included in the Code of Ethics and Standards of Conduct.

A)
Financial planning is a process that integrates a client’s life goals with material elements of financial planning subject areas.
B)
Financial planning denotes the process of determining how a client’s financial goals can be met through the proper management of the client’s financial assets.
C)
Financial planning denotes a process that advises clients on meeting life goals through application of the Practice Standards.
D)
Financial planning is a collaborative process that helps maximize a client’s potential for meeting life goals through financial advice that integrates relevant elements of the client’s personal and financial circumstances.

Answer 31

The answer is financial planning is a collaborative process that helps maximize a client’s potential for meeting life goals through financial advice that integrates relevant elements of the client’s personal and financial circumstances. The definition of “financial planning” presented in the Code of Ethics and Standards of Conduct makes clear that it is a collaborative process for maximizing a client’s potential for meeting the client’s life goals. Financial Advice must integrate relevant elements of a client’s personal and financial circumstances.

LO 5.1.1

Question 32

Identify the transgressions that are presumed to be unacceptable according to CFP Board’s Fitness Standards.

Felony conviction for tax fraud or other tax-related crimes
Felony conviction for theft, embezzlement, or other financially-based crimes
Revocation of a financial professional license that is administrative in nature
One personal bankruptcy
A)
I and III
B)
I, II, and IV
C)
III and IV
D)
I and II

Answer 32

The answer is I and II. III and IV are incorrect, Felony conviction for tax fraud or other tax-related crimes is considered unacceptable conduct and will always bar an individual from becoming certified, as will a felony conviction for theft, embezzlement or other financially-based crimes. Revocation of a financial professional license that is administrative in nature does not impact an individual’s certification prospects. A single personal bankruptcy is not presumed to be unacceptable. Two or more personal or business bankruptcies will be presumed to be unacceptable and thus bar certification, unless the Disciplinary and Ethics Committee (DEC) reconsiders and makes a different determination after a review.

LO 5.2.1

Question 33

Which of these statements regarding the Standards in the Code and Standards is CORRECT?

The Standard of Professionalism requires a CFP® professional to treat Clients, prospective Clients, fellow professionals, and others with dignity, courtesy, and respect.
The Standard of Diligence demands honesty and candor, which may be subordinated to personal gain.
A)
I only
B)
Both I and II
C)
Neither I nor II
D)
II only

Answer 33

The answer is I only. The Standard of Integrity, not Diligence, demands honesty and candor, which may not be subordinated to personal gain.

LO 5.1.2

Question 34

Select the phrase that best completes this statement: Relevant elements of personal and financial circumstances

A)
are identified in the Practice Standards.
B)
should be identified in step 1 of the financial planning process.
C)
are the cornerstone of the Code and Standards.
D)
vary from Client to Client.

Answer 34

The answer is vary from Client to Client. According to the Code and Standards, Application of the Practice Standards for the Financial Planning Process, “relevant elements of personal and financial circumstances vary from Client to Client.”

LO 5.1.1

Question 35

Alan has just come into your office. He was referred to you as a new client from an attorney with whom you have done some business previously. Alan is 50 years old and has expressed a desire to retire in five years. Alan has told you that he does not feel comfortable taking any risk with his money and that he has $100,000 currently in his 401(k) at work and $10,000 in a bank savings account. Given this information, what would be the first step in the financial planning process that you will take on Alan’s behalf?

A)
Identify potential goals.
B)
Analyze Alan’s current course of action.
C)
Develop the financial planning recommendation(s).
D)
Understand Alan’s personal and financial circumstances.

Answer 35

The answer is understand Alan’s personal and financial circumstances. You have just met Alan. As a planner you have some information, but you do not have nearly enough information to analyze anything. And though you have begun to gather information, there is no ability to develop a plan based on what has been provided as information thus far.

LO 5.1.3

Question 36

Choose the requirements that must be fulfilled for a CFP® professional to act as a fiduciary.

Engage the client with care, skill, prudence, and diligence.
Consider the client’s goals, risk tolerance, objectives, and circumstances.
Adhere to the Terms of the Engagement and follow ‘reasonable and lawful’ client instructions.
Avoid, fully disclose, obtain consent or manage Material Conflicts of Interest.
A)
I and II
B)
III and IV
C)
I, II, III, and IV
D)
II only

Answer 36

The answer is I, II, III, and IV. All of these are requirements that must be fulfilled for a CFP® professional to act as a fiduciary, set forth in the Standards of Conduct, Fiduciary (Standard A.1).

LO 5.1.4

Question 37

Select the components of Standard A.15, Refrain from Borrowing or Lending Money and Commingling Financial Assets.

Commingling of financial assets is prohibited.
Borrowing and lending is allowed if the client is a family member.
Borrowing and lending is allowed if the lender is an organization or entity in the business of lending money.
This standard limits indirect borrowing to family members and lending organizations.
A)
I, II, and III
B)
I and IV
C)
I, II, III, and IV
D)
II and III

Answer 37

The answer is I, II, and III. According to Standard A.15, CFP® professionals must refrain from borrowing or lending money. Commingling of financial assets is prohibited. Borrowing and lending is allowed if the client is a family member or if the lender is an organization or entity in the business of lending money. Statement IV is incorrect; this standard explicitly prohibits indirect borrowing.

LO 5.1.3

Question 38

Jessica has been working in the financial services profession for 11 years and has been a CFP® professional for over 5 years. During this time, she has developed into a highly sought-after investment professional who is well-versed in retirement and estate planning. Although she has limited knowledge of insurance products, she recommends specific products to help her clients reach their goals without consulting an insurance professional. Select the Standard of Conduct that Jessica is violating.

A)
Professionalism
B)
Diligence
C)
Competence
D)
Objectivity

Answer 38

The answer is Competence. According to Standard A.3, Competence, a CFP® professional must provide Professional Services with competence, which means with relevant knowledge and skill to apply that knowledge. When the CFP® professional is not sufficiently competent in a particular area to provide the Professional Services required under the Engagement, the CFP® professional must gain competence, obtain the assistance of a competent professional, limit or terminate the Engagement, and/or refer the Client to a competent professional.

LO 5.1.2

Question 39

The introduction to the Code and Standards specifies that the Code of Ethics must be followed

A)
when Financial Planning takes place.
B)
when Financial Advice is present.
C)
when Financial Advice provided requires Financial Planning.
D)
at all times.

Answer 39

The answer is at all times. The introduction states, “The Code of Ethics applies at all times, and sets forth principles that guide the behavior of CFP® professionals, with elaboration provided in the Standards.”

LO 5.1.1

Question 40

According to the Procedural Rules, following the issue of an Interim Suspension Order, a Respondent must deliver to CFP Board Counsel evidence of compliance with the Interim Suspension Order. Identify the number of calendar days the Respondent has to complete delivery.

A)
45
B)
30
C)
60
D)
10

Answer 40

The answer is 10. From the Procedural Rules: “Within 10 calendar days of delivery of an Interim Suspension Order, Respondent must deliver to CFP Board Counsel evidence of compliance with the Interim Suspension Order.”

LO 5.2.2

Question 41

After delivering a Notice of Investigation and conducting an investigation, if CFP Board Counsel finds probable cause, CFP Board Counsel must take any one of these actions except

A)
Settlement Offer.
B)
Letter of Dismissal.
C)
Complaint.
D)
Evidence of Compliance.

Answer 41

The answer is Evidence of Compliance. If CFP Board Counsel finds probable cause, CFP Board Counsel must take one of these actions:

Letter of Dismissal
Settlement Offer
Complaint
LO 5.2.2

Question 42

Identify the situations in which Standard A.1, Fiduciary Duty, must be upheld.

At all times
At all times when providing Financial Advice that requires Financial Planning
At all times when providing Financial Advice
At all times when providing Financial Advice that does not require Financial Planning
A)
II and III
B)
I and III
C)
I only
D)
II, III, and IV

Answer 42

The answer is II, III, and IV. Per Standard A.1. of the Code and Standards, “at all times when providing Financial Advice to a Client, a CFP® professional must act as a fiduciary and, therefore, act in the best interests of the Client.” (Standard A.1.) The Fiduciary Duty must be upheld at all times when providing Financial Advice, regardless of whether or not Financial Planning is required.

LO 5.1.4

Question 43

According to the Code of Ethics and Standards of Conduct, what is the definition of financial planning?

A)
Financial planning denotes the process of determining how a client’s financial goals can be met through the proper management of their financial assets.
B)
Financial planning is a collaborative process that helps maximize a client’s potential for meeting life goals through financial advice that integrates relevant elements of the client’s personal and financial circumstances.
C)
Financial planning denotes a process that advises clients on meeting life goals through application of the Practice Standards.
D)
Financial planning is a process that integrates a client’s life goals with material elements of financial planning subject areas.

Answer 43

The answer is financial planning is a collaborative process that helps maximize a client’s potential for meeting life goals through financial advice that integrates relevant elements of the client’s personal and financial circumstances. The definition of “financial planning” presented in the Code of Ethics and Standards of Conduct makes clear that it is a collaborative process for maximizing a client’s potential for meeting their life goals. Financial Advice must integrate relevant elements of a client’s personal and financial circumstances.

LO 5.1.1

Question 44

Damien has hired a CFP® professional for consultation on estate planning strategies that preserve wealth for his family. Identify the relevant elements in Damien’s financial planning engagement.

I. Preserve or increase wealth

II. Identify tax considerations

III. Pursue philanthropic interests

IV. Address estate and legacy matters

A)
II and III
B)
I and IV
C)
I, II, III, and IV
D)
II, III, and IV

Answer 44

The answer is I and IV. Damien has specifically identified preservation of wealth and estate matters in his financial planning arrangement. Both of these are considered relevant elements.

LO 5.1.1

Question 45

All of the following are Integration Factors necessary to act in the client’s best interest within a financial planning engagement except

A)
the effect on the Client’s overall exposure to risk if the Client implements the Financial Advice.
B)
portion and amount of the Client’s Financial Assets that the Financial Advice may affect.
C)
the number of relevant elements of the Client’s personal and financial circumstances that the Financial Advice may affect.
D)
the anticipated overall duration of the engagement.

Answer 45

The answer is the anticipated overall duration of the engagement. Integration Factors include the following:

The number of relevant elements of the Client’s personal and financial circumstances that the Financial Advice may affect;
The portion and amount of the Client’s Financial Assets that the Financial Advice may affect;
The length of time the Client’s personal and financial circumstances may be affected by the Financial Advice;
The effect on the Client’s overall exposure to risk if the Client implements the Financial Advice; and
The barriers to modifying the actions taken to implement the Financial Advice.
LO 5.1.1

Question 46

Sabrina recently signed a letter of engagement with Amanda, a CFP® professional. She hopes to implement an active investing strategy within her investment portfolio that sells overvalued holdings, purchases undervalued stocks, and maintains tax-efficiency. Identify the relevant elements in Sabrina’s financial planning engagement.

Preserve or increase wealth
Identify tax considerations
Manage cash flow
Address estate and legacy matters
A)
I, II, III, and IV
B)
I and II
C)
II, III, and IV
D)
I and III

Answer 46

The answer is I and II. Sabrina has specifically identified increasing wealth and managing tax in her financial planning arrangement. Both of these are considered relevant elements.

LO 5.1.1

Question 47

Clients may be able to recover civil damages in a lawsuit from their financial planner if advice given is improper or inappropriate because advisers have a responsibility to the client as

A)
a fiduciary.
B)
a registered representative.
C)
a broker-dealer.
D)
an insurance agent .

Answer 47

The answer is a fiduciary. As a fiduciary, a financial planner’s primary responsibility is to every client. In that light, if advice given is improper or inappropriate, the client may be able to recover civil damages in a private lawsuit.

LO 5.1.4

Question 48

Sarah, a CFP® professional, completed a life insurance application for her client, Chase. When Chase called her two weeks later about the status of the application, Sarah realized she had not submitted it to the insurance company. Which of these ethical principles has Sarah violated?

A)
Professionalism
B)
Diligence
C)
Objectivity
D)
Integrity

Answer 48

The answer is diligence. Sarah violated the Standard of Diligence because she did not provide services in a reasonably prompt and thorough manner.

LO 5.1.2

Question 49

Identify the Integration Factors that indicate a Financial Planning Engagement is occurring.

The number of relevant elements of the Client’s personal and financial circumstances that the Financial Advice may affect
The portion and amount of the Client’s Financial Assets that the Financial Advice may affect
The compensation structure to which the Client has agreed
The frequency at which Client meetings occur
A)
I only
B)
III and IV
C)
I and II
D)
I, II, III, and IV

Answer 49

The answer is I and II. The number of relevant elements of the Client’s personal and financial circumstances that the Financial Advice may affect and the portion/amount of the Client’s Financial Assets that the Financial Advice may affect are variables that help to determine whether Financial Planning is occurring.

LO 5.1.1

Question 50

Select the sanction that is a period of time in which a Respondent who currently is not a CFP® professional is prohibited from applying for or obtaining CFP® certification.

A)
Private Censure
B)
Public Censure
C)
Temporary Bar
D)
Suspension

Answer 50

The answer is Temporary Bar. A Temporary Bar is a period during which a Respondent who currently is not a CFP® professional is prohibited from applying for or obtaining CFP® certification.

LO 5.2.2

Question 51

According to the Code and Standards, Standard A.1 (Fiduciary Duty) must be upheld in every situation except

A)
interactions in which general observations about financial matters are discussed.
B)
at all times when providing Financial Advice that requires Financial Planning.
C)
at all times when providing Financial Advice.
D)
at all times when providing Financial Advice that does not require Financial Planning.

Answer 51

The answer is interactions in which general observations about financial matters are discussed. Per the Code and Standards: “At all times when providing Financial Advice to a Client, a CFP® professional must act as a fiduciary and, therefore, act in the best interests of the Client.” (Standard A.1.) The Fiduciary Duty must be upheld at all times when providing Financial Advice, regardless of whether or not Financial Planning is required. Standard A.1 does not apply in situations where general financial matters are discussed.

LO 5.1.4

Question 52

Select the sanction that is a period of time in which Respondent remains subject to the Terms and Conditions of Certification and Trademark License but is not Certified or Licensed and is prohibited from using the CFP® certification marks.

A)
Private Censure
B)
Public Censure
C)
Suspension
D)
Temporary Bar

Answer 52

The answer is Suspension. A Suspension is a period of time during which the Respondent remains subject to the Terms and Conditions of Certification and Trademark License but is not Certified or Licensed and is prohibited from using the CFP® certification marks.

LO 5.2.2

Question 53

Select the exception(s) to the Confidentiality and Privacy guidelines (Standard A.9) of the Standards of Conduct.

Information used for ordinary business purposes (e.g., personal information necessary for an estate planning attorney to draft a will)
Information transferred for legal and compliance purposes (e.g., subpoenas)
A)
Neither I nor II
B)
II only
C)
I only
D)
Both I and II

Answer 53

The answer is both I and II. Both of these are correct. A CFP® professional is required to keep confidential and protect the security of personal nonpublic information about clients; however, the Code and Standards sets forth the circumstances when confidential information may be disclosed for 1) ordinary business purposes, or for 2) legal and enforcement purposes.

LO 5.1.3

Question 54

Select the obligations the CFP® certificant has to her current clients.

To maintain competence in all areas of financial planning
To advise of any certification suspension or revocation she received from CFP Board
To be in compliance with applicable regulatory requirements governing the professional services provided
To provide reasonable and practical professional supervision to any subordinate or third party to whom she assigns responsibility for any client services
A)
I, II, and IV
B)
III and IV
C)
III only
D)
II, III, and IV

Answer 54

The answer is II, III, and IV. Under CFP Board Standards of Conduct, CFP® certificants must only have competence in areas in which they are engaged to provide professional services.

LO 5.1.3

Question 55

Which of the following statements regarding the Code and Ethics, Sound and Objective Professional Conduct is CORRECT?

A CFP® professional must exercise professional judgment on behalf of the Client that is not subordinated to the interest of the CFP® professional or others.
A CFP® professional may not solicit or accept any gift, gratuity, entertainment, noncash compensation, or other consideration, valued at greater than $25, that reasonably could be expected to compromise the CFP® professional’s objectivity.
A)
II only
B)
Both I and II
C)
I only
D)
Neither II nor I

Answer 55

The answer is I only. A CFP® professional may not solicit or accept any gift, gratuity, entertainment, noncash compensation, or other consideration, of any value, that reasonably could be expected to compromise the CFP® professional’s objectivity.

LO 5.1.2

Question 56

Per the Fitness Standards, an individual is eligible to submit a petition for consideration after having engaged in any of the following categories of conduct except

A)
Two or more personal or business bankruptcies.
B)
Suspension of a financial professional license.
C)
Revocation of a financial professional license.
D)
Revocation or suspension of a non-financial professional.

Answer 56

The answer is Revocation of a financial professional license. An individual with two or more personal or business bankruptcies would receive a presumptive bar, according to the guidelines of the Fitness Standards. Conduct leading to a presumptive bar is eligible for a petition for consideration. Revocation of a financial professional license, unless the revocation is administrative in nature (e.g., the result of the individual determining not to renew the license by not paying the required fees) is deemed unacceptable and will always bar an individual from becoming certified.

Question 57

The Disciplinary and Ethics Commission (DEC) may elect to do all of the following in response to a petition for consideration received in response of a presumptive bar except

A)
Suspend.
B)
Deny, but permit re-application.
C)
Grant.
D)
Deny.

Answer 57

The answer is Suspend. Per the Fitness Standards, the DEC may grant a petition, deny a petition, or deny the petition but permit the individual to re-apply.

LO 5.2.1

Question 58

Identify the item that is NOT a responsibility of the Respondent following an Interim Suspension Order, per the Procedural Rules.

A)
Must not suggest that Respondent is a CFP® professional
B)
Must refrain from all activities in financial services
C)
Refrain from use of the CFP® certification marks
D)
Prohibited from stating that Respondent is a CFP® professional

Answer 58

The answer is must refrain from all activities in financial services. A Respondent subject to an Interim Suspension Order must not use the CFP® certification marks or state or suggest that Respondent is a CFP® professional while the Interim Suspension Order is in effect.

LO 5.2.2

Question 59

All of the following are requirements listed in Standard A.5, Disclose and Manage Conflicts of Interest (Standard A.5) except

A)
exercise due care.
B)
obtain informed consent.
C)
manage the conflict of interest.
D)
avoid or fully disclose material conflicts of interest by providing sufficiently specific facts.

Answer 59

The answer is exercise due care. Exercise due care is a principle in the Code of Ethics. According to Standard A.5, A CFP® professional must avoid or fully disclose material conflicts of interest by providing sufficiently specific facts, obtain informed consent, and manage the conflict of interest.

LO 5.1.3

Question 60

Identify the Fiduciary Duty that corresponds to the following definition: “A CFP® professional must act with . . . skill, prudence, and diligence that a prudent professional would exercise in light of the Client’s goals, risk tolerance, objectives, and financial and personal circumstances.”

A)
Duty to Comply
B)
Duty of Loyalty
C)
Duty to Follow Client Instructions
D)
Duty of Care

Answer 60

The answer is Duty of Care. Standard A.1, Fiduciary Duty, defines the Duty of Care as a CFP® professional’s obligation to “act with the care, skill, prudence, and diligence that a prudent professional would exercise in light of the Client’s goals, risk tolerance, objectives, and financial and personal circumstances.”

LO 5.1.4

Question 61

When providing financial planning services to a client, a certificant needs to provide these services with integrity. Select the statement that is NOT a characteristic of Standard A.2, Integrity.

A)
A certificant is placed in a position of trust by his clients, and the ultimate source of that trust is the certificant’s personal integrity.
B)
Integrity ensures that information is accessible only to those authorized to have access.
C)
Allowance can be made for innocent error and legitimate differences of opinion, but integrity cannot coexist with deceit or subordination of one’s principles.
D)
Integrity demands honesty and candor, which must not be subordinated to personal gain and advantage.

Answer 61

The answer is Integrity ensures that information is accessible only to those authorized to have access. Standard A.9, Confidentiality and Privacy, ensures that information is accessible only to those authorized to have access.

LO 5.1.3

Question 62

Choose the term that corresponds to a Client’s need for, or desire to, select and prioritize goals, optimize tax planning, ensure adequate funds for retirement, and preserve wealth.

A)
Professional Services
B)
Relevant Elements
C)
Engagement Factors
D)
Material Information

Answer 62

The answer is Relevant Elements. Relevant elements refer to a Client’s need for or desire to select and prioritize goals, optimize tax planning, ensure adequate funds for retirement, preserve wealth, and many other items unique to a Client’s situation.

LO 5.1.1

Question 63

Identify the Integration Factors that indicate a Financial Planning Engagement is occurring.

The number of relevant elements of the Client’s personal and financial circumstances that the Financial Advice may affect
The agreed-upon compensation arrangement
The overall amount of qualitative and quantitative data provided by the Client
The barriers to modifying the actions taken to implement the Financial Advice
A)
I only
B)
III and IV
C)
I and IV
D)
I, II, III, and IV

Answer 63

The answer is I and IV. The number of relevant elements of the Client’s personal and financial circumstances that the Financial Advice may affect any presence of barriers to modifying the actions taken to implement the Financial Advice are Integration Factors.

LO 5.1.1

Question 64

Which of the following will not necessarily bar an individual from becoming a CFP® certificant?

A)
Felony conviction for embezzlement
B)
Felony conviction for rape
C)
A bankruptcy filing within the last five years
D)
Felony conviction for tax fraud

Answer 64

The answer is a bankruptcy filing within the last five years. Candidate fitness standards are set in two categories: conduct that is unacceptable and will always bar an individual from being certified, and conduct that is presumed unacceptable and will bar the individual unless the individual petitions the Disciplinary and Ethics Commission for reconsideration. Conduct that will always bar an individual include felony convictions for theft, embezzlement, or tax fraud; revocation of a financial professional license (other than revocation for failure to pay fees); or felony conviction for murder, rape, or any violent crime within the last five years. Conduct deemed to be a presumptive bar includes a felony conviction for nonviolent crimes within the past five years or two or more personal or business bankruptcies (regardless of the timeframe).

LO 5.2.2

Question 65

According to CFP Board’s Fitness Standards, which of the following are form(s) of unacceptable conduct that will always bar an individual from becoming certified?

Two or more personal or business bankruptcies.
Felony conviction for tax fraud or other tax-related crimes.
Felony conviction for any violent crime within the last five years.
Revocation of a financial professional license that is administrative in nature.
A)
II only
B)
I and III
C)
II and III
D)
II and IV

Answer 65

The answer is II and III. Felony conviction for tax fraud, tax-related crimes, or violent crime within the last five years is considered unacceptable conduct and will always bar an individual from becoming certified. Statement IV is incorrect. Revocation of a financial professional license that is administrative in nature does not impact an individual’s certification prospects. Statement I is incorrect. The conduct of CFP® candidates with two or more personal or business bankruptcies is presumed to be unacceptable, and thus bar certification, unless the Disciplinary and Ethics Commission (the Commission) reconsiders and makes a different determination after a review.

LO 5.2.1

Question 66

Naima, a CFP® professional, offers financial planning services to ultra-high net worth clients in her Registered Independent Advisory firm. Select the services that Naima provides that are considered relevant elements of financial planning according to CFP Board’s Code and Standards.

Managing cash flow
Developing client goals
Providing for educational needs
Preserving or increasing wealth
A)
I, II, and IV
B)
II and IV
C)
III only
D)
I, II, III, and IV

Answer 66

The answer is I, II, III, and IV. All of these are considered relevant elements of financial planning according to CFP Board’s Code and Standards.

LO 5.1.3

Question 67

Identify the Standard of Conduct (Duties Owed to Clients) that would be violated if a CFP® professional fails to provide professional services, including responding to reasonable client inquiries, in a timely and thorough manner.

A)
Diligence (Standard A.4)
B)
Duties When Communicating With a Client (Standard A.11)
C)
Professionalism (Standard A.7)
D)
Integrity (Standard A.2)

Answer 67

The answer is Diligence (Standard A.4). Diligence (Standard A.4) states that a CFP® professional must provide professional services, including responding to reasonable client inquiries, in a timely and thorough manner.

LO 5.1.3

Question 68

Regarding the use of technology, a CFP® professional must do which of the following?

Have a reasonable basis for believing the technology produces reliable, objective, and appropriate outcomes
Exercise reasonable care and judgment when selecting, using, or recommending technology
Have a reasonable level of understanding of technology’s assumptions and outcomes
Become a technology expert
A)
II and III
B)
I and II
C)
I, II, and III
D)
I, III, and IV

Answer 68

The answer is I, II, and III. A CFP® professional is not required to become a technology expert. Instead, CFP® professionals are required to act reasonably when using technology.

LO 5.1.3

Question 69

Sarah, a CFP® professional, completed a life insurance application for her client, Chase. When Chase called her two weeks later about the status of the application, Sarah realized she had not submitted it to the insurance company. Which of the following ethical principles has Sarah violated?

A)
Diligence
B)
Integrity
C)
Objectivity
D)
Fairness

Answer 69

The answer is diligence. Sarah violated the Principle of Diligence because she did not provide services in a reasonably prompt and thorough manner.

LO 5.1.2

Question 70

Identify the Fiduciary Duty that corresponds to the following definition “A CFP® professional must avoid Conflicts of Interest, or fully disclose Material Conflicts of Interest to the Client, obtain the Client’s informed consent, and properly manage the conflict.”

A)
Duty of Care
B)
Duty to Comply
C)
Duty to Follow Client Instructions
D)
Duty of Loyalty

Answer 70

The answer is Duty of Loyalty. Standard A.1, Fiduciary Duty, defines the Duty of Loyalty as a CFP® professional’s obligation to “avoid Conflicts of Interest, or fully disclose Material Conflicts of Interest to the Client, obtain the Client’s informed consent, and properly manage the conflict.”

LO 5.1.4

Question 71

John has been a CFP® professional for over five years and recently earned a specialized retirement designation. Although John has limited understanding of estate planning, he often recommends specific estate transfer strategies to help his clients reach their desired goals without incurring the high costs of an estate planning attorney. Select the Standard of Conduct that John is violating.

A)
Competence
B)
Objectivity
C)
Professionalism
D)
Diligence

Answer 71

The answer is competence. According to Standard A.3, Competence, a CFP® professional must provide Professional Services with competence, which means with relevant knowledge and skill to apply that knowledge. When the CFP® professional is not sufficiently competent in a particular area to provide the Professional Services required under the Engagement, the CFP® professional must gain competence, obtain the assistance of a competent professional, limit or terminate the Engagement, and/or refer the Client to a competent professional.

LO 5.1.2

Question 72

CFP Board’s Fitness Standards apply to all of the following except

A)
individuals who are not currently certified but have been certified by CFP Board in the past.
B)
CFP® candidates.
C)
individuals who are eligible to reinstate their certification without being required to pass the current CFP® Certification Examination.
D)
practicing CFP® professionals.

Answer 72

The answer is practicing CFP® professionals. The Fitness Standards apply to CFP® candidates and Professionals Eligible for Reinstatement (PER). PER includes both individuals who are not currently certified but have been certified by CFP Board in the past and individuals who are eligible to reinstate their certification without being required to pass the current CFP® Certification Examination.

LO 5.2.1

Question 73

A CFP® certificant advises a client to purchase a real estate limited partnership. The client has told the CFP® certificant that she has a very conservative risk tolerance. If the CFP® certificant convinces the client to make this investment, which concept has been violated?

A)
The requirement to disclose a conflict of interest
B)
Confidentiality
C)
Due diligence
D)
The requirement to act as a fiduciary

Answer 73

The answer is the requirement to act as a fiduciary. As a fiduciary, a CFP® certificant has a responsibility to always act in the client’s best interest. Convincing a client to make an unsuitable investment could expose the CFP® certificant to a lawsuit.

LO 5.1.4

Question 74

Pam has consulted a CFP® professional to design and implement tax-efficient estate planning strategies that incorporate charitable donations and preserve wealth for her family. Identify the relevant elements in Pam’s financial planning engagement.

Preserve or increase wealth
Identify tax considerations
Pursue philanthropic interests
Address estate and legacy matters
A)
I and IV
B)
II and III
C)
II, III, and IV
D)
I, II, III, and IV

Answer 74

The answer is I, II, III, and IV. All of these are relevant elements in Pam’s financial planning arrangement.

LO 5.1.1

Question 75

Identify the form(s) of unacceptable conduct that will always bar an individual from becoming certified, according to CFP Board’s Fitness Standards.

Felony conviction for tax fraud or other tax-related crimes
Felony conviction for any violent crime within the last five years
Revocation of a financial professional license that is administrative in nature
Two or more personal or business bankruptcies
A)
I and II
B)
II and IV
C)
II only
D)
I and III

Answer 75

The answer is I and II. Felony conviction for tax fraud, tax-related crimes, or violent crime within the last five years is considered unacceptable conduct and will always bar an individual from becoming certified. Statement III is incorrect; revocation of a financial professional license that is administrative in nature does not impact an individual’s certification prospects. Statement IV is incorrect; the conduct of CFP® candidates with two or more personal or business bankruptcies is presumed to be unacceptable, and thus bar certification, unless the Disciplinary and Ethics Commission (the Commission) reconsiders and makes a different determination after a review.

LO 5.2.1

Question 76

CFP Board releases _________________ to summarize decisions pertaining to violation of the Code and Standards.

A)
disciplinary memoranda
B)
anonymous case histories
C)
certification rulings
D)
practice assessments

Answer 76

The answer is anonymous case histories. Anonymous case histories summarize decisions pertaining to violation of the Code and Standards.

LO 5.1.2

Question 77

Identify items that CFP® professionals must consider during Step 4—Developing the Financial Planning Recommendation(s)—of the Practice Standards for the Financial Planning Process.

How the recommendation integrates relevant elements of the client’s personal and financial circumstances
The likelihood of the client to renew the client-planner engagement
How well the proposed recommendations will align with the Firm’s financial planning philosophy
The anticipated material effects of the recommendation on the client’s financial and personal circumstances
A)
III and IV
B)
I, II, III, and IV
C)
I only
D)
I and IV

Answer 77

The answer is I and IV. Statement II and Statement III are incorrect; during Step 4—Developing the Financial Planning Recommendation(s) of the Practice Standards for the Financial Planning Process the financial planner must consider

how the recommendation is designed to maximize the potential to meet the client’s goals
the anticipated material effects of the recommendation on the client’s financial and personal circumstances, and
how the recommendation integrates relevant elements of the client’s personal and financial circumstances (this requires a CFP® professional to look at how the recommendation takes into account other aspects of the Client’s life).
LO 5.1.3

Question 78

Which of these is a requirement of one of the Standards of Conduct?

A)
A CFP® certificant’s compensation shall reflect the average charges for similar services in the same geographic area.
B)
A CFP® certificant who obtains any information, not required to be kept confidential by the code, which may raise a question of unprofessional, fraudulent, or illegal conduct by another CFP® certificant or other financial professional, shall not disclose that information.
C)
A CFP® professional must keep confidential and may not disclose any non-public personal information about any prospective, current, or former client, except as necessary to defend against allegations of wrongdoing made by a governmental authority.
D)
In any area of financial planning where a CFP® certificant has minimal professional competence, only general information may be included in any plan presented to a client. Under no circumstances may the planner provide additional information.

Answer 78

The answer is a CFP® professional must keep confidential and may not disclose any non-public personal information about any prospective, current, or former client, except as necessary to defend against allegations of wrongdoing made by a governmental authority. A CFP® certificant may reveal personally identifiable information relating to a client relationship under specific circumstances as outlined in the Standards of Conduct.

LO 5.1.3

Question 79

Madison, a CFP® professional, offers financial planning services to high net worth clients in her Registered Independent Advisory firm. Select the services that Madison provides that are considered relevant elements of financial planning according to CFP Board’s Code and Standards.

Managing cash flow
Developing client goals
Preserving or increasing wealth
Providing for educational needs
A)
II and IV
B)
I, II, III, and IV
C)
I, II, and III
D)
III only

Answer 79

The answer is I, II, III, and IV. All of these are considered relevant elements of financial planning, according to CFP Board’s Code and Standards.

LO 5.1.1

Question 80

Taylor, a CFP® professional, recently had a disagreement with Dallas, another CFP® professional, while working with clients they share. The disagreement over how best to implement the clients’ plan was so severe that they no longer work on cases together. For the past several months, Taylor has been making a point of sharing his low opinion of Dallas with anyone who will listen. Identify the Standard of Conduct that Taylor has violated.

A)
Objectivity
B)
Integrity
C)
Professionalism
D)
Confidentiality

Answer 80

The answer is professionalism. According to Standard A.7, Professionalism, the CFP® professional must treat Clients, prospective Clients, fellow professionals, and others with dignity, courtesy, and respect.

LO 5.1.2

Question 81

Select the instances in which a CFP® professional must adhere to the Practice Standards.

Financial Planning
Any communication where financial matters are discussed
Financial Advice that incorporates relevant elements of a client’s situation
Any engagement where the client understands that the planner will offer or has already offered financial planning services
A)
II only
B)
I, II, and IV
C)
I, III, and IV
D)
III and IV

Answer 81

The answer is I, III, and IV. There are several instances in which a CFP® professional must adhere to the Practice Standards, such as providing Financial Advice that incorporates relevant elements of a client’s situation, and any engagement where the client understands that the planner will offer or has already offered financial planning services. There is no requirement to follow the Practice Standards in any communication where financial matters are discussed.

LO 5.1.1

Question 82

All of these are included in Standard A.15 (Refrain from Borrowing or Lending Money and Commingling Financial Assets) except

A)
borrowing and lending is allowed if the lender is an organization or entity in the business of lending money.
B)
indirect borrowing is permitted.
C)
CFP® professionals must refrain from borrowing or lending money.
D)
borrowing and lending is allowed if the client is a family member.

Answer 82

The answer is indirect borrowing is permitted. Refrain from Borrowing or Lending Money and Commingling Financial Assets (Standard A.15): CFP® professionals must refrain from borrowing or lending money. Commingling of financial assets is prohibited. Borrowing and lending is allowed if the client is a family member or if the lender is an organization or entity in the business of lending money. This standard explicitly prohibits indirect borrowing.

LO 5.1.3

Question 83

Select the sanction that is the termination of a Respondent’s Certification and Trademark License.

A)
Public Censure
B)
Revocation
C)
Suspension
D)
Permanent Bar

Answer 83

The answer is revocation. A revocation is the termination of a Respondent’s Certification and Trademark License. CFP Board publishes a revocation in accordance with Article 16.7. A Respondent whose CFP® Certification and License is revoked is permanently barred from applying for or obtaining CFP® Certification.

LO 5.2.2

Question 84

Clark Parsons, CFP®, has prepared a comprehensive plan for Eldon and Andrea Findlay. In order to maintain control and be assured that the plan is carried out for the greatest benefit of the Findlays, Clark should

be licensed to sell insurance and securities to guarantee that only the appropriate products are purchased.
provide the Findlays with standard trust and will templates to keep the cost down and assure timely implementation of the plan.
work with the Findlays to locate appropriate professionals to assist in the implementation of various parts of the plan.
help the Findlays prioritize the various aspects of the plan.
A)
I and II
B)
III and IV
C)
II and IV
D)
I and III

Answer 84

The answer is III and IV. A planner should help clients prioritize the various parts of a prepared financial plan and coordinate with appropriate professionals who he helps the clients find. Whether to sell insurance or securities is a choice to be made by a planner, but it will provide no more of a guarantee that the correct products are purchased than working with a qualified professional in those fields. The provision of standard trusts and wills is likely to be considered the unlicensed practice of law. In most cases, clients with good financial planners will not be using standard documents because the planner will help them understand the benefits of planning for their unique circumstances.

LO 5.1.3

Question 85

Select the categories of conduct defined in the Fitness Standards.

Conduct Deemed a Temporary Bar
Conduct Deemed a Presumptive Bar
Conduct Deemed Unacceptable
Conduct Deemed Adverse
A)
II and III
B)
I and II
C)
II and IV
D)
I and III

Answer 85

The answer is II and III. Conduct Deemed Unacceptable and Conduct Deemed a Presumptive Bar are the categories of conduct defined in the Fitness Standards.

LO 5.2.1

Question 86

Per the Fitness Standards, an individual is eligible to submit a petition for consideration after having engaged in any of the following categories of conduct except

A)
two or more personal or business bankruptcies.
B)
suspension of a financial professional license.
C)
felony conviction for theft, embezzlement or other financially-based crimes.
D)
revocation or suspension of a non-financial professional.

Answer 86

The answer is felony conviction for theft, embezzlement or other financially-based crimes. An individual with two or more personal or business bankruptcies would receive a presumptive bar according to the guidelines of the Fitness Standards. Conduct leading to a presumptive bar is eligible for a petition for consideration. Felony conviction for theft, embezzlement or other financially-based crimes is deemed unacceptable and will always bar an individual from becoming certified.

LO 5.2.1

Question 87

The Code of Ethics is composed of ____ principles.

A)
3
B)
7
C)
6
D)
15

Answer 87

The answer is 6. The Code of Ethics is composed of these six principles:

Act with honesty, integrity, competence, and diligence.
Exercise due care.
Maintain the confidentiality and protect the privacy of client information.
Act in the client’s best interests.
Avoid or disclose and manage conflicts of interest.
Act in a manner that reflects positively on the financial planning profession and CFP® certification.
LO 5.1.2

Question 88

Identify the day counting rules that apply when the Procedural Rules state a time in calendar days.

Exclude the day of the event that triggers the period
Include the day of the event that triggers the period
Count every day, excluding intervening Saturdays, Sundays, and federal legal holidays
Include the last day of the period, but if the last day is a Saturday, Sunday, or federal legal holiday, the period continues to run until the end of the next day that is not a Saturday, Sunday, or federal legal holiday
A)
II and IV
B)
I and IV
C)
II and III
D)
II, III, and IV

Answer 88

The answer is I and IV. When the Procedural Rules state a time in calendar days

exclude the day of the event that triggers the period
count every day, including intervening Saturdays, Sundays, and federal legal holidays; and
include the last day of the period, but, if the last day is a Saturday, Sunday, or federal legal holiday, the period continues to run until the end of the next day that is not a Saturday, Sunday, or federal legal holiday.
LO 5.2.2

Question 89

In order to proceed with a petition for reinstatement, a Respondent must have completed all of the following except

A)
paid the reinstatement fee and any outstanding costs owed to CFP Board.
B)
provided a written certification that the Respondent has read, understands, and will comply with the Code and Standards.
C)
completed a CFP Board verified Ethics continuing education (CE) course.
D)
completed the suspension.

Answer 89

The answer is completed a CFP Board verified Ethics continuing education (CE) course. The Respondent’s Petition must not proceed unless the Respondent has

completed the suspension;
provided a properly completed CFP Board Ethics Disclosure Questionnaire;
provided a written certification that the Respondent has read, understands, and will comply with the Code and Standards;
paid the reinstatement fee and any outstanding costs owed to CFP Board; and
otherwise satisfied CFP Board’s certification requirements.
LO 5.2.2

Question 90

Choose the Code of Ethics principle that a CFP® professional is following by making clients aware of any arrangement by which someone who is not the client will compensate or provide some other material economic benefit to the planner, firm, or a related party.

A)
Act with honesty, integrity, competence, and diligence.
B)
Avoid or disclose and manage conflicts of interest.
C)
Exercise due care.
D)
Maintain the confidentiality and protect the privacy of client information.

Answer 90

A CFP® professional is required, per the Code of Ethics, to avoid or disclose and manage conflicts of interest. By disclosing any arrangement by which someone who is not the client will compensate or provide some other material economic benefit to the planner, firm, or a Related Party, the planner is upholding the fourth principle of the Code of Ethics: “Avoid or disclose and manage conflicts of interest.”

LO 5.1.2

Question 91

Madison, a CFP® professional, offers financial planning services to high net worth clients in her Registered Independent Advisory firm. Which of the services that Madison provides is considered a relevant element of financial planning according to the CFP Board Code and Standards?

A)
Avoid or disclose and manage conflicts of interest
B)
Manage assets and liabilities
C)
Uphold fiduciary duty when providing Financial Advice
D)
Maintain confidentiality and privacy

Answer 91

The answer is manage assets and liabilities. Relevant elements are the components of the Client’s personal and financial circumstances that the Financial Advice may affect. Relevant elements vary from Client to Client depending on goals, needs, and overall circumstances. Managing assets and liabilities is a relevant element.

LO 5.1.1

Question 92

Athena, a CFP® professional, offers financial planning services to high net worth clients in her Registered Independent Advisory firm. Select the services that Athena provides that are considered relevant elements of financial planning according to CFP Board’s Code and Standards.

Managing cash flow
Developing client goals
Preserving or increasing wealth
Providing for educational needs
A)
II and IV
B)
III only
C)
I, II, III, and IV
D)
I, II, and III

Answer 92

The answer is I, II, III, and IV. All of these are considered relevant elements of financial planning according to CFP Board’s Code and Standards.

LO 5.1.3

Question 93

Armaan, a CFP® professional, offers financial planning services to ultra-high net worth clients in his Registered Independent Advisory firm. Select the services Armaan provides that are considered relevant elements of financial planning, according to CFP Board’s Code and Standards.

Achieving financial security
Identifying tax considerations
Providing high returns on investments
Addressing estate and legacy matters
A)
I and III
B)
I, II, III, and IV
C)
I, II, and IV
D)
II, III, and IV

Answer 93

The answer is I, II, and IV. Providing high returns on investments is not a relevant element. All of the others are considered relevant elements of financial planning, according to CFP Board’s Code and Standards.

LO 5.1.1

Question 94

Which of the following is presumed to be unacceptable and thus bar certification unless the Disciplinary and Ethics Commission reconsiders and makes a different determination after a review?

A)
Felony conviction for rape
B)
Felony conviction for embezzlement
C)
Felony conviction for tax fraud
D)
Felony conviction for nonviolent crimes within the past five years

Answer 94

The answer is felony conviction for nonviolent crimes within the past five years. Candidate fitness standards are set in two categories: conduct that is unacceptable and will always bar an individual from being certified and conduct that is presumed unacceptable and will bar the individual unless the individual petitions the Disciplinary and Ethics Commission for reconsideration. Conduct that will always bar an individual include felony convictions for theft, embezzlement, or tax fraud; revocation of a financial professional license (other than revocation for failure to pay fees); or felony conviction for murder, rape, or any violent crime within the last five years. Conduct deemed to be a presumptive bar includes a felony conviction for nonviolent crimes within the past five years or two or more personal or business bankruptcies (regardless of the time frame).

LO 5.2.1

Question 95

The Code of Ethics is composed of six __________.

A)
rules of conduct.
B)
principles.
C)
Guidelines.
D)
Standards.

Answer 95

The answer is principles. The Code of Ethics is composed of these six principles:

Act with honesty, integrity, competence, and diligence.
Exercise due care.
Maintain the confidentiality and protect the privacy of client information.
Act in the client’s best interests.
Avoid or disclose and manage conflicts of interest.
Act in a manner that reflects positively on the financial planning profession and CFP® certification.
LO 5.1.2

Question 96

Select the subsections included in Standard A.1, Fiduciary Duty.

Duty of Care
Duty of Confidentiality
Duty to Keep Current
Duty of Loyalty
A)
II only
B)
I and IV
C)
I, III, and IV
D)
III and IV

Answer 96

The answer is I and IV. At all times, when providing Financial Advice to a Client, a CFP® professional must act as a fiduciary and, therefore, act in the best interests of the Client. Standard A.1 identifies three subsections: Duty of Care, Duty of Loyalty, and Duty to Follow Client Instructions.

LO 5.1.4

Question 97

According to the CFP Board Code and Standards, which of the following is considered a relevant element of financial planning?

A)
Collaborate to prioritize goals
B)
Achieve financial security
C)
Use of Form ADV, Part 2
D)
Clear and understandable Client communications

Answer 97

The answer is achieve financial security. Relevant elements are the components of the Client’s personal and financial circumstances that the Financial Advice may affect. Relevant elements vary from Client to Client depending on goals, needs, and overall circumstances. A client’s plan to achieve financial security is a relevant element.

LO 5.1.1

Question 98

Select the option that is NOT available to the Discipline and Ethics Commission (DEC) when reviewing the Hearing Panel’s findings and recommendations.

A)
Deny
B)
Accept
C)
Modify
D)
Reject

Answer 98

The answer is deny. During the DEC review and issuance of the final order, the DEC may accept, reject, or modify the Hearing Panel’s findings and recommendations.

LO 5.2.2

Question 99

Select the Code of Ethics principle that a CFP® professional is following by acting with skill, prudence, and diligence that a prudent professional would exercise in light of the client’s goals, risk tolerance, objectives, and financial and personal circumstances.

A)
Act in a manner that reflects positively on the financial planning profession and CFP® certification.
B)
Exercise due care.
C)
Act with honesty, integrity, competence, and diligence.
D)
Avoid or disclose and manage conflicts of interest.

Answer 99

The answer is exercise due care. A CFP® professional exercises due care by acting with skill, prudence, and diligence that a prudent professional would use in light of the client’s goals, risk tolerance, objectives, and financial and personal circumstances.

LO 5.1.2

Question 100

Select the information that CFP Board is permitted to publish if public discipline is imposed.

Confidential information relevant to the discipline
Names of family members of the Respondent
Name of the Respondent
Form of Discipline
A)
I and III
B)
I, III, and IV
C)
III and IV
D)
II and IV

Answer 100

The answer is I, III, and IV. CFP Board has the right to identify the Respondent and the form of discipline, and provide some or all of the facts, as CFP Board has determined them to be, that CFP Board has determined are relevant to the discipline, including information that otherwise may be private or confidential under the Procedural Rules.

LO 5.2.2

Question 101

Identify steps included in CFP Board’s Practice Standards for the Financial Planning Process.

Monitoring and Updating
Identifying and Selecting Goals
Establishing and Defining the Client-Planner Relationship
Developing the Financial Planning Recommendation(s)
A)
I, II, III, and IV
B)
II and IV
C)
I, II, and IV
D)
III and IV

Answer 101

The answer is I, II, and IV. Establishing and Defining the Client-Planner Relationship is not included in CFP Board’s Practice Standards for the Financial Planning Process.

LO 5.1.3

Question 101

Select the requirements defined in Step 7 (Monitoring Progress and Updating) of Practice Standards for the Financial Planning Process.

Address monitoring and updating responsibilities
Monitor the client’s progress
Obtain current qualitative and quantitative information
Update goals, recommendations, or implementation decisions
A)
III only
B)
I, II, III, and IV
C)
II, III, and IV
D)
I, II, and IV

Answer 101

The answer is I, II, III, and IV. All of these requirements are included in Step 7 (Monitoring Progress and Updating) of Practice Standards for the Financial Planning Process.

LO 5.1.3

Question 102

Select the exception(s) to the Confidentiality and Privacy guidelines (Standard A.9) of the Standards of Conduct.

Information used for ordinary business purposes (e.g., personal information necessary for an estate planning attorney to draft a will)
Information transferred for legal and compliance purposes (e.g., subpoenas)
A)
Both I and II
B)
Neither I or II
C)
I only
D)
II only

Answer 102

The answer is both I and II. Both of these are correct. A CFP® professional is required to keep confidential and protect the security of personal nonpublic information about clients; however, the Code and Standards sets forth the circumstances when confidential information may be disclosed for 1) ordinary business purposes, or for 2) legal and enforcement purposes.

LO 5.1.1

Question 103

All of these statements comprise the Fiduciary Duty, Duty of Loyalty, except

A)
avoid Conflicts of Interest, or fully disclose Material Conflicts of Interest to the Client, obtain the Client’s informed consent, and properly manage the conflict.
B)
act with the care, skill, prudence, and diligence that a prudent professional would exercise.
C)
act without regard to the financial or other interests of the CFP® professional, the CFP® Professional’s Firm, or any individual or entity other than the Client.
D)
place the interests of the Client above the interests of the CFP® professional and the CFP® Professional’s Firm.

Answer 103

“Act with the care, skill, prudence, and diligence that a prudent professional would exercise” is a statement that is found in the Fiduciary Duty, Duty of Care, NOT the Duty of Loyalty.

LO 5.1.4

Question 104

By being competent enough to give advice, even if they delegate or consult with others, CFP® professionals are fulfilling

A)
the Duty of Care.
B)
the Duty of Loyalty.
C)
the Duty to Follow Client’s Instructions.
D)
the Duty to CFP Board.

Answer 104

A CFP® professional who exercises care, skill, prudence, and diligence to act in the best interests of the Client is fulfilling the Duty of Care requirements described in the Fiduciary standard (Standard A.1). This includes being competent to give advice, even if the CFP® professional delegates or consults with others.

LO 5.1.4

Question 105

Identify the item that would NOT be viewed as Financial Advice according to the Code of Ethics and Standards of Conduct.

A)
The development or implementation of a Financial Plan
B)
The selection and retention of other persons to provide financial or Professional Services
C)
The exercise of discretionary authority over the Financial Assets of a Client
D)
A communication that, based on its content, context, and presentation, would not reasonably be viewed as a recommendation

Answer 105

The answer is a communication that, based on its content, context, and presentation, would not reasonably be viewed as a recommendation. The determination of whether Financial Advice has been provided is an objective rather than subjective inquiry. The more individually tailored the communication is to the Client, the more likely the communication will be viewed as Financial Advice. A communication that, based on its content, context, and presentation, would not reasonably be viewed as a recommendation would not be considered Financial Advice.

LO 5.1.1

Question 106

Which of these is NOT an acceptable compensation method to disclose to clients according to the Duties When Representing Compensation Method (Standard A.12)?

A)
Sales-Related
B)
Fee-Based
C)
Commission-Based
D)
Fee-Only

Answer 106

The answer is Commission-Based. Commission-Based is not included as an appropriate compensation method to disclose to clients in Standard A.12. If the compensation method includes commissions, then it should be defined as sales-related compensation.

LO 5.1.3

Question 106

Select the sanction that is an unpublished written reproach of the Respondent that the Discipline and Ethics Commission (DEC) delivers to a censured Respondent.

A)
Public Censure
B)
Temporary Bar
C)
Suspension
D)
Private Censure

Answer 106

The answer is Private Censure. A Private Censure is an unpublished written reproach of a Respondent that the DEC delivers to the censured Respondent.

LO 5.2.2

Question 107

All of the following are Duties Owed to CFP Board specified in the Code and Standards except

A)
provide a narrative statement to CFP Board on reportable matters.
B)
report incidents involving adverse conduct to CFP Board within 60 days.
C)
compliance with the Terms and Conditions of Certification and License.
D)
avoid any adverse conduct.

Answer 107

The answer is report incidents involving adverse conduct to CFP Board within 60 days. According to the Duties Owed to CFP Board, CFP Professionals must Report incidents involving adverse conduct to CFP Board within 30 days.

LO 5.1.3

Question 108

Identify the situations in which Standard A.1, Fiduciary Duty, must be upheld.

At all times
Anytime financial matters are discussed with current or prospective clients
At all times when providing Financial Advice
At all times when providing Financial Advice that does not require Financial Planning
A)
II, III, and IV
B)
III and IV
C)
I and III
D)
I only

Answer 108

The answer is III and IV. Per the Code and Standards, “at all times when providing Financial Advice to a Client, a CFP® professional must act as a fiduciary and, therefore, act in the best interests of the Client.” (Standard A.1.) The Fiduciary Duty must be upheld at all times when providing Financial Advice, regardless of whether Financial Planning is required or not.

LO 5.1.4

Question 109

Under specific circumstances, a CFP® professional must act as a fiduciary and, therefore,

A)
collaborate with the client to develop S.M.A.R.T. goals.
B)
analyze the current course of action and potential alternate course(s).
C)
act in the Client’s best interests.
D)
manage all client matters with prudence and professionalism.

Answer 109

The answer is act in the Client’s best interests. At all times when providing Financial Advice to a Client, a CFP® professional must act as a fiduciary and, therefore, act in the best interests of the Client.

LO 5.1.4

Question 110

Brenda and her loan company, SureCash Enterprises, have been Owen’s clients since he began his financial planning practice several years ago. Owen, a CFP® professional, would like to purchase new computer equipment. Because she admires Owen, Brenda has offered to loan him money, either personally or through SureCash.

As a rule, under the Standards of Conduct, Owen should not borrow money from his clients. Identify the circumstances that are exceptions to the rule that would allow Owen to borrow money from a client.

Brenda personally lends Owen money, and she is his mother.
Brenda personally lends Owen money, and their client-planner relationship has existed for more than 10 years.
Brenda is a friend and personally makes Owen a loan with a competitive interest rate that is secured by collateral.
SureCash makes a loan to Owen. SureCash is a financial institution in the business of lending money, and the borrowing is unrelated to any professional services performed by Owen.
A)
II and III
B)
I and IV
C)
I, II, and IV
D)
III only

Answer 110

The answer is I and IV. If Brenda is a member of Owen’s immediate family, he is allowed to borrow from her. If SureCash is in the business of lending money and the borrowing is unrelated to the financial planning services provided to SureCash, a loan to Owen is permitted. Regarding a loan from a client, the terms of the loan and the duration of the client-planner relationship are irrelevant. Standard A.15, Refrain From Borrowing or Lending Money and Commingling Financial Assets, defines these guidelines and exceptions.

Question 111

Select the group to which CFP Board’s Fitness Standards apply.

A)
CFP® practitioners
B)
CFP® certificants
C)
Candidates for the CFP® exam
D)
CFP® professionals

Answer 111

The Fitness Standards apply to candidaes for the CFP® exam and Professionals Eligible for Reinstatement (PER). PER includes both individuals who are not currently certified but have been certified by CFP Board in the past and individuals are eligible to reinstate their certification without being required to pass the current CFP® Certification Examination.

LO 5.2.1

Question 112

Select the category of conduct defined in the Fitness Standards for which a petition for consideration is NOT permitted.

A)
Conduct Deemed Unacceptable
B)
Conduct Deemed a Temporary Bar
C)
Conduct Deemed Adverse
D)
Conduct Deemed a Presumptive Bar

Answer 112

The answer is Conduct Deemed Unacceptable. Conduct Deemed Unacceptable is the category of conduct defined in the Fitness Standards under which an individual may not submit a petition for consideration.

LO 5.2.1