Client Advisory Services Flashcards
7 cards from real CFP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Client Advisory Services flashcards as text
A client asks their fintech advisor to explain the difference between a custodian and a robo-advisor platform. The MOST accurate explanation is:
Answer: The robo-advisor provides automated investment management; the custodian holds and safeguards the actual assets
Robo-advisors manage portfolios algorithmically, while custodians (often separate entities) hold client assets and execute transactions.
A client with a $500,000 portfolio is considering switching from a traditional advisor to a digital wealth platform. The advisor should highlight which POTENTIAL disadvantage of the digital platform?
Answer: Limited access to human guidance during complex life events such as divorce or business sale
At higher asset levels, complex situations often require personalized human judgment that pure digital platforms may not adequately provide.
A fintech advisor is reviewing a client's use of a buy-now-pay-later (BNPL) service. The PRIMARY financial planning concern with habitual BNPL use is:
Answer: BNPL can mask true cash flow deficits and create hidden debt obligations that undermine budget planning
BNPL obscures real spending patterns and creates installment obligations that may not appear in standard credit reports, complicating cash flow analysis.
A client is evaluating a tokenized real estate investment on a blockchain platform. The advisor should FIRST assess:
Answer: Whether the token offering complies with SEC securities regulations and what liquidity mechanisms exist
Regulatory compliance status and liquidity terms are the foundational due diligence items for any tokenized securities offering.
A client retirement account is managed by an AI advisory system that rebalances based on market signals. Under ERISA, who retains fiduciary responsibility for the investment decisions?
Answer: The plan sponsor and/or named fiduciary who selected and monitors the AI advisory system
Under ERISA, fiduciary responsibility cannot be delegated to an AI system; the plan sponsor or named fiduciary retains accountability for selecting and overseeing the tool.
A client asks whether their robo-advisor's tax-loss harvesting feature can eliminate all capital gains taxes in a given year. The advisor should clarify that tax-loss harvesting:
Answer: Defers taxes by offsetting gains now, but reduces the cost basis of replacement securities, creating future taxable gains
Tax-loss harvesting provides timing benefits by deferring gains, but lower cost basis in replacement securities means taxes are typically paid later.
A fintech advisor working with a newly immigrated client must pay special attention to which aspect of digital financial planning?
Answer: FATCA reporting obligations, foreign account disclosures, and cross-border tax implications that affect financial recommendations
Immigrants often have foreign accounts and income subject to FATCA, FBAR, and treaty provisions that significantly affect financial planning strategies.