AAFM AAFM Financial Planning Principles 2

Question 1

A client wants a plan that coordinates investments, taxes, insurance, and estate goals into one strategy. Which planning approach does this describe?

Accepted Answer

Comprehensive financial planning

Answer

Comprehensive financial planning integrates all areas of a client's finances into a unified strategy.

Question 2

In the financial planning process, what is the correct step immediately after establishing the client relationship and scope?

Accepted Answer

Gathering client data and defining goals

Answer

After defining scope, the planner collects data and clarifies the client's goals and expectations.

Question 3

Which document formally defines the services, responsibilities, and compensation between planner and client?

Accepted Answer

Engagement letter

Answer

An engagement letter sets out the scope, duties, and fees governing the planning relationship.

Question 4

A planner recommends a product that pays the highest commission rather than the best fit for the client. Which principle is violated?

Accepted Answer

Duty to act in the client's best interest

Answer

Placing personal compensation above client needs breaches the fiduciary best-interest duty.

Question 5

What primarily distinguishes a fee-only planner from a commission-based one?

Accepted Answer

Fee-only planners receive no compensation from product sales

Answer

Fee-only planners are paid solely by clients, avoiding commission conflicts of interest.

American Academy of Financial Management (AAFM) Practice Test