Technology & Digital Applications Flashcards

A CFP practitioner is evaluating robo-advisor platforms for a client. Which feature is MOST important for ensuring the platform meets fiduciary standards?

Answer: Transparent algorithm disclosure and conflict-of-interest policies

Fiduciary robo-advisors must disclose how their algorithms work and any conflicts of interest, such as proprietary fund preferences.

Which cybersecurity framework is most commonly recommended for financial planning firms seeking to protect client data?

Answer: NIST Cybersecurity Framework

The NIST Cybersecurity Framework provides a flexible, risk-based approach widely adopted by financial services firms for data protection.

A client wants to use a budgeting app that aggregates all financial accounts. What is the primary data-sharing risk the CFP should explain?

Answer: Aggregators may store login credentials or use screen scraping, creating security vulnerabilities

Many aggregators store user credentials or use screen scraping rather than secure API connections, exposing accounts to unauthorized access.

Which regulation primarily governs how registered investment advisers must safeguard client data in electronic form?

Answer: Gramm-Leach-Bliley Act (GLBA) Safeguards Rule

The GLBA Safeguards Rule requires financial institutions, including RIAs, to develop written information security programs to protect client nonpublic personal information.

A client asks about using cryptocurrency as part of their retirement portfolio. Which statement best reflects current CFP guidance?

Answer: Crypto carries significant volatility, regulatory uncertainty, and custody risks that must be clearly disclosed

CFP practitioners must disclose the substantial risks of cryptocurrency—including extreme volatility, evolving regulation, and custody challenges—before recommending it.

What is open banking, and how does it affect financial planning clients?

Answer: A regulatory framework allowing third-party apps to access client financial data via secure APIs with consent

Open banking uses secure APIs so clients can authorize third-party financial apps to access their account data, enabling better financial planning integrations.

A financial planning firm stores client files in a cloud service. Which practice BEST reduces the risk of a data breach?

Answer: Enabling multi-factor authentication and encrypting data at rest and in transit

MFA combined with encryption of data at rest and in transit provides layered security that significantly reduces breach risk.