AFC Financial Counseling Principles & Ethics 4 — Questions and Answers
Question 1: A financial counselor discovers a client has been hiding assets from their spouse during a joint session. What is the ethically appropriate first step?
- Immediately disclose the information to the spouse
- Continue the session as if nothing was revealed
- Address the conflict of interest and consider whether joint counseling can continue (Correct answer)
- Report the client to authorities for financial fraud
Correct answer: Address the conflict of interest and consider whether joint counseling can continue
When a conflict of interest arises in joint counseling, the counselor must address the situation directly and assess whether impartial service to both parties can continue.
Question 2: Which ethical principle requires a financial counselor to place the client's interests above their own personal or financial gain?
- Autonomy
- Beneficence
- Fiduciary duty (Correct answer)
- Non-maleficence
Correct answer: Fiduciary duty
Fiduciary duty obligates the counselor to act in the client's best interest rather than their own, prioritizing the client's financial well-being.
Question 3: A client asks their AFC to recommend a specific investment product. How should the counselor respond?
- Recommend the product that pays the highest referral fee
- Explain that AFCs provide counseling and education, not investment advice, and refer to a licensed advisor (Correct answer)
- Decline to discuss investments entirely
- Provide the recommendation based on general financial knowledge
Correct answer: Explain that AFCs provide counseling and education, not investment advice, and refer to a licensed advisor
AFCs practice within their scope by providing financial education and counseling, referring investment advice to appropriately licensed professionals.
Question 4: Under the AFC Code of Ethics, what must a counselor do when they recognize they lack competence to address a client's specific issue?
- Attempt to handle it and learn as they go
- Charge a reduced fee for the service
- Refer the client to a qualified professional (Correct answer)
- Ask a colleague for informal advice without the client's knowledge
Correct answer: Refer the client to a qualified professional
The competence standard requires counselors to refer clients to qualified professionals when the issue falls outside their expertise.
Question 5: A financial counselor works for a nonprofit agency that receives funding from a payday lending company. What ethical concern does this raise?
- None, as long as services are free to clients
- A potential conflict of interest that must be disclosed to clients (Correct answer)
- A legal violation that must be reported to regulators
- A competency issue requiring additional training
Correct answer: A potential conflict of interest that must be disclosed to clients
Funding sources that could influence counseling recommendations create conflicts of interest that must be transparently disclosed to clients.
Question 6: Which practice best demonstrates the principle of client self-determination in financial counseling?
- Making financial decisions on behalf of overwhelmed clients
- Presenting options and allowing the client to choose their own course of action (Correct answer)
- Insisting clients follow the counselor's recommended budget
- Withholding risky options to protect the client from bad decisions
Correct answer: Presenting options and allowing the client to choose their own course of action
Self-determination means empowering clients to make their own informed decisions rather than directing or controlling their choices.
Question 7: A counselor notices a client appears to be in an abusive relationship where their partner controls all finances. What is the counselor's primary ethical obligation?
- Ignore it as it falls outside financial counseling scope
- Ensure client safety and provide information about resources while respecting autonomy (Correct answer)
- Confront the abusive partner directly
- Refuse to work with the client until the situation is resolved
Correct answer: Ensure client safety and provide information about resources while respecting autonomy
The counselor must prioritize client safety, provide relevant resources, and respect the client's autonomy in deciding how to proceed.
AFC Financial Counseling Principles & Ethics 4
A financial counselor discovers a client has been hiding assets from their spouse during a joint session.
What is the ethically appropriate first step?