The Financial Planning Process

Question 1

An individual (can also be called an agent) who has passed the appropriate regulatory exams and is authorized to sell securities to clients and charge a commission

Answer 1

Broker

Question 2

A firm in the business of buying and selling securities, operating as both _________, depending upon the transaction. A firm acts as a _____ when it executes orders on behalf of clients, and acts as a _____ when it
trades for its own account.

Answer 2

Broker - Dealer

Question 3

A written set of rules and expectations that embodies principles for behavior, a list of standards for professional conduct, and a set of disciplinary
procedures.

Answer 3

Code of Ethics

Question 4

When a planner or adviser receives compensation directly tied to a client buying or selling a particular product

Answer 4

Commissions

Question 5

A financial plan that covers just about all of a person’s financial objectives, including consideration of risk management, investment planning, tax planning, retirement planning, and estate planning.

Answer 5

Comprehensive financial plan

Question 6

Occurs when the planner has choices that benefit them more than the client, or may get in the way of providing the most objective advice for the client. For example, there may be two products, both of which would be helpful for the client, but the planner would receive a higher commission on one versus the other. Conflicts of interest will always exist; the
important thing is for the planner to disclose them to clients

Answer 6

Conflict of interest.

Question 7

A questionnaire used by financial planners to gather

information, both quantitative and qualitative, from clients.

Answer 7

Data survey form

Question 8

Financial planners who charge both a fee and can receive commissions.

Answer 8

Fee-based Planning

Question 9

Financial planners who charge a fee for their services and do not receive any commissions. Examples include charging an asset under management (AUM) fee, or a retainer fee, or an hourly fee.

Answer 9

Fee-only planning

Question 10

Always acting in the best interests of the client

Answer 10

Fiduciary standard

Question 11

A relationship between two parties in which one has a high duty to act in utmost good faith and look out for the best interests of the other.

Answer 11

Fiduciary relationship

Question 12

A written statement, clearly defined and quantified, that identifies the financial purpose to be achieved. Goals should be clear as to purpose, time frame, and amount (“PTA”)

Answer 12

Financial Goal

Question 13

The development and implementation of total, coordinated plans designed to achieve an individual’s financial objectives.

Answer 13

Financial Planning

Question 14

Consists of seven steps: understanding the client’s personal and financial circumstances; identifying and selecting goals; analyzing the client’s current course of action and potential alternate course(s) of action; developing the financial planning
recommendations; presenting the financial planning recommendations;implementing the financial planning recommendations; and monitoring progress and updating.

Answer 14

Financial Planning Process

Question 15

Which regulates brokers and broker-dealers.

Answer 15

FINRA Financial Industry Regulatory Authority

Question 16

The regulatory form that all registered investment advisers (RIAs) must file with the SEC and provide to each and every client

Answer 16

Form ADV Part 2

Question 17

Pertains to the financial planning process. ______ are what the person wishes to accomplish as a result of planning (often used interchangeably
with goals).

Answer 17

Objectives

Question 18

The process of determining whether and how an individual can meet life goals through the proper management of financial resources.

Answer 18

Personal Financial Planning

Question 19

The principle that requires attaining, maintaining, and applying a sufficient level of knowledge and skill in servicing the client.

Answer 19

Principle of competence

Question 20

The principle that requires not disclosing “any confidential client information without the specific consent of the client unless in response to proper legal process.”

Answer 20

Principle of confidentiality

Question 21

The principle that “demands honesty and candor which must not be subordinated to personal gain and advantage.”

Answer 21

Principle of integrity

Question 22

The principle that requires the application of intellectual honesty and impartiality.

Answer 22

Principle of objectivity.

Question 23

The principle that requires the conduct of a

financial planner to reflect credit upon the profession.

Answer 23

Principle of professionalism

Question 24

Investment advisers who provide advice on investments to clients, and must register with either the SEC or with the states, depending assets they have under management.

Answer 24

Registered investment adviser (RIA)

Question 25

A federal regulatory agency established under the Securities Exchange Act of 1934. It mission is to protect investors, maintain fair, orderly, and efficient markets, and to facilitate capital formation.

Answer 25

Securities and Exchange Commission (SEC)

Question 26

A lesser standard than the fiduciary standard that requires an investment be “_____” for a client. This is not as strong a standard as the fiduciary standard, which requires that any advice given always be in the best interest of the client. An investment may be suitable, but not in the best interest of the client

Answer 26

“Suitable investment” standard

Question 27

A financial plan that looks at just one objective, such as funding a college education, buying a first home, caring for an elderly parent or handicapped child, or planning for retirement

Answer 27

Targeted financial planning