CFP Technology & Digital Applications 5 â Questions and Answers
Question 1: A client asks whether their robo-advisor account is SIPC-insured. Which statement is accurate?
- All robo-advisor accounts are FDIC-insured up to $250,000
- SIPC protects customers of broker-dealer robo-advisors against firm failure, but does not protect against investment losses (Correct answer)
- Robo-advisors are not eligible for any investor protection insurance
- SIPC covers unlimited losses including market declines
Correct answer: SIPC protects customers of broker-dealer robo-advisors against firm failure, but does not protect against investment losses
SIPC protects brokerage customers if the firm fails by covering up to $500,000 in securities and cash, but it does not insure against market losses.
Question 2: A CFP wants to use predictive analytics to identify clients at risk of abandoning their financial plan. Which data source is MOST appropriate?
- Social media sentiment data purchased from third parties
- CRM behavioral data such as login frequency, meeting attendance, and response rates (Correct answer)
- Credit bureau reports updated monthly
- Public tax return databases
Correct answer: CRM behavioral data such as login frequency, meeting attendance, and response rates
Behavioral engagement signals from the firm's own CRMâlike declining logins or missed reviewsâare the most appropriate and privacy-compliant predictors of disengagement.
Question 3: Which factor primarily distinguishes a fee-based digital financial plan from a subscription-based model?
- Fee-based plans charge per transaction while subscription models charge annual fees
- Fee-based plans typically charge a one-time project fee, while subscription models charge recurring fees for ongoing access and updates (Correct answer)
- Subscription models are only offered by robo-advisors
- Fee-based digital plans are prohibited by the CFP Board
Correct answer: Fee-based plans typically charge a one-time project fee, while subscription models charge recurring fees for ongoing access and updates
A one-time fee-based digital plan covers a specific deliverable, whereas subscription pricing gives ongoing access to the planner and plan updates for a recurring fee.
Question 4: What does 'behavioral finance technology' refer to in a digital financial planning platform?
- Software that monitors client spending behavior for fraud detection
- Tools that incorporate behavioral economics insights to nudge clients toward better financial decisions (Correct answer)
- Algorithms that replicate client behavioral patterns to automate trading
- Platforms that track social behavior for targeted marketing
Correct answer: Tools that incorporate behavioral economics insights to nudge clients toward better financial decisions
Behavioral finance technology applies insights from psychologyâlike default enrollment and loss aversion framingâto guide clients toward savings and planning goals.
Question 5: A CFP is recommending a financial planning software platform to a small practice. Which security certification BEST indicates the vendor properly safeguards client data?
- ISO 14001 (Environmental Management)
- SOC 2 Type II report demonstrating ongoing operational security controls (Correct answer)
- PCI DSS Level 4 self-assessment
- HIPAA Business Associate Agreement only
Correct answer: SOC 2 Type II report demonstrating ongoing operational security controls
A SOC 2 Type II report provides independent auditor verification of a vendor's security controls over an extended period, making it the strongest indicator of operational data security.
Question 6: How does digital identity verification (e.g., Know Your Customer technology) benefit a CFP's onboarding process?
- It eliminates the need for anti-money laundering compliance
- It automates client identity authentication, reducing fraud risk and streamlining regulatory compliance during account opening (Correct answer)
- It replaces the client intake questionnaire entirely
- KYC technology is only required for cryptocurrency accounts
Correct answer: It automates client identity authentication, reducing fraud risk and streamlining regulatory compliance during account opening
Automated KYC tools verify government IDs and cross-check watchlists in real time, speeding onboarding while satisfying AML and BSA regulatory requirements.
Question 7: A client is concerned about the environmental impact of their investments and wants to use technology to screen their portfolio. Which tool best supports ESG integration?
- A real-time commodity futures trading platform
- ESG screening and scoring software that rates holdings on environmental, social, and governance criteria (Correct answer)
- A tax preparation platform with depreciation calculators
- A robo-advisor using only passive index strategies without screens
Correct answer: ESG screening and scoring software that rates holdings on environmental, social, and governance criteria
ESG screening software analyzes portfolio holdings against environmental, social, and governance metrics, allowing the CFP to align investments with the client's values.
CFP Technology & Digital Applications 5
A client asks whether their robo-advisor account is SIPC-insured.
Which statement is accurate?