FFC Personal Financial Planning 5

Question 1

Which behavioral finance concept explains why clients are more motivated by avoiding losses than by achieving equivalent gains?

Accepted Answer

Loss aversion

Answer

Loss aversion, identified by Kahneman and Tversky, describes the tendency to feel losses approximately twice as intensely as equivalent gains.

Question 2

What is the main advantage of a Health Savings Account (HSA) compared to a Flexible Spending Account (FSA)?

Accepted Answer

HSA funds never expire and roll over year to year, while FSA funds are typically use-it-or-lose-it

Answer

HSA balances roll over indefinitely and can be invested, making them a powerful long-term savings tool, unlike the FSA's annual forfeiture rule.

Question 3

A client asks about the impact of a 1% annual fee difference on a $200,000 investment over 30 years at 7% growth. What is the approximate cost of the higher fee?

Accepted Answer

$120,000

Answer

A 1% fee difference on a $200,000 portfolio over 30 years at 7% growth costs approximately $120,000–$140,000 in lost compounding.

Question 4

When should a financial fitness coach refer a client to a licensed financial advisor or CPA rather than providing guidance themselves?

Accepted Answer

When the client needs specific investment product recommendations or tax preparation services

Answer

Coaches are not licensed to provide specific securities recommendations or prepare taxes — those services require licensed professionals.

Question 5

What is a 'sinking fund' in personal financial planning?

Accepted Answer

A dedicated savings account built up over time to cover a specific planned future expense

Answer

A sinking fund is intentional savings accumulated gradually to cover a known future expense, such as car replacement or annual insurance premiums.

(FFC) Financial Fitness Coach Certification Practice Test

(FFC) Financial Fitness Coach Certification Practice Test

FFC Personal Financial Planning 5