FREE FPQP Financial Planning Question and Answers

Question 1

1. Potential goals should be identified by the client
2. Time frame has to be established
3. Goal should be stated in quantifiable terms as far as amount (e.g., how much money and beginning when)

Accepted Answer

LO 1-2: Steps to setting a financial goal

Answer

LO 1-1: Definition of personal financial planning

Answer

LO 1-1: Areas of financial planning

Answer

LO 1-5: Regulatory Issues: Tax Services

Question 2

1. Understanding the client's personal and financial circumstances
2. Identifying and selecting goals
3. Analyzing the client's current course of action and potential alternate course(s) of action
4. Developing the financial planning recommendations
5. Presenting the financial planning recommendations
6. Implementing the financial planning recommendations
7. Monitoring the progress and updating

Accepted Answer

LO 1-1: Seven Steps of (personal) Financial Planning

Answer

LO 1-1: What is the difference between comprehensive and targeted planning?

Answer

LO 1-1: Definition of personal financial planning

Answer

LO 1-2: Steps to setting a financial goal

Question 3

-as start of process, planner establishes a client file and a system for periodic review and revision
-planner monitors the performance of the market, investments specific to client's plan, changes in tax law, and general economic environment
-at regularly scheduled reviews with the client the planner evaluates the currently implemented recommendations relative to any changes in the client's situation
-if goals, health status, income, or other personal circumstances change then the planner returns to the second step of the process and gathers new data to make new recommendations

Accepted Answer

LO 1-3: Step 7 of Financial Planning Process: Monitoring Progress and Updating

Answer

LO 1-3: Step 5 of Financial Planning Process: Presenting the Financial Planning Recommendations

Answer

LO 1-3: Step 1 of Financial Planning Process: Understanding the client's personal and financial circumstances

Answer

LO 1-3: Step 4 of Financial Planning Process: Developing the Financial Planning Recommendations

Question 4

Usually in one of three ways:
1. Sales-related compensation - planner gets paid only if the client actually buys or sells something.
2. Fee only - planner gets paid regardless of whether an actual product is purchased. Some planners charge an AUM fee (assets under management fee). Ex: AUM fee is 1% and client's investments total $500,000....then planners will receive $5,000 yearly (usually broken down into quarterly payments) -another approach is to charge an hourly fee
3. A combination of commissions and fees (sometimes called "fee based") - ex: planner may charge an AUM fee and also earn commission on a life insurance policy if purchased by the client

Accepted Answer

LO 1-3: How do financial planners get paid?

Answer

LO 1-5: Regulatory Issues: The unauthorized practice of law

Answer

LO 1-3: Defining the engagement

Answer

LO 1-5: Four E's to becoming a CFP

Question 5

1. Education - there is an educational requirement in the key areas that are discussed in this course. Usually takes 1-2 years to complete this component
2. Exam - there is a one day, six hour exam that must be taken and passed
3. Experience - must have three years of full-time financial planning process experience before they can use the CFP mark
4. Ethics - there is an ongoing ethics requirement... CFP must complete ethical declarations and be subject to a background check

Accepted Answer

LO 1-5: Four E's to becoming a CFP

Answer

LO 1-1: Areas of financial planning

Answer

LO 1-3: Defining the engagement

Answer

LO 1-3: How do financial planners get paid?

Question 6

-only attorneys are authorized to practice law
-financial services professional cannot engage in unauthorized practice of law
-unauthorized practice of law=drawing up wills, contracts, or other legal documents
-There is no one regulator who oversees comprehensive financial planning...instead there are multiple regulators in the various areas of financial planning: investments, insurance, taxes, etc......so a financial planner may need to be registered with VARIOUS regulators not just one.

Accepted Answer

LO 1-5: Regulatory Issues: The unauthorized practice of law

Answer

LO 1-5: Regulatory Issues: Investment and Insurance advice

Answer

LO 1-5: Regulatory Issues: Tax Services

Answer

LO 1-1: Seven Steps of (personal) Financial Planning

Question 7

LO 1-4: Fundamental Areas of Financial Planning

Accepted Answer

-estate planning
-cash management
-investment planning
-retirement planning
-tax planning
-insurance planning

Answer

-If an individual is preparing tax returns for others they need to obtain a PTIN (preparer taxpayer identification number)
-a competency test may also be necessary

Answer

a collaborative process that helps maximize a Client's potential for meeting life goals through Financial Advice that integrates relevant elements of the Client's personal and financial circumstances.

Answer

1. Potential goals should be identified by the client
2. Time frame has to be established
3. Goal should be stated in quantifiable terms as far as amount (e.g., how much money and beginning when)

Question 8

1. Comprehensive planning just about covers all aspects of a person's financial situation including consideration of risk management, investment planning, tax planning, retirement planning, and estate planning
2. Targeted planning typically addresses only a segment of an individual's objectives such as trying to buy a first home, caring for an elderly parent, or reducing tax burdens. Often times a targeted plan becomes the starting point for a comprehensive plan.

Accepted Answer

LO 1-1: What is the difference between comprehensive and targeted planning?

Answer

LO 1-3: Step 7 of Financial Planning Process: Monitoring Progress and Updating

Answer

LO 1-1: Seven Steps of (personal) Financial Planning

Answer

LO 1-2: What does PTA stand for? (as it relates to goal setting)

Question 9

-planner uses compiled data and the analysis of that data to develop financial planning recommendations and/or alternatives
-may require consultation with other professionals
-identify appropriate measures for achieving client objectives in light of the current economic environment
-planner selects alternative investment vehicles, insurance products, employee benefits, income tax strategies, etc.
-recommendations are then presented to the client
-client goals may be reordered or changed during this process

Accepted Answer

LO 1-3: Step 4 of Financial Planning Process: Developing the Financial Planning Recommendations

Answer

LO 1-3: Step 6 of Financial Planning Process: Implementing the Financial Planning Recommendations

Answer

LO 1-3: Step 5 of Financial Planning Process: Presenting the Financial Planning Recommendations

Answer

LO 1-3: Step 7 of Financial Planning Process: Monitoring Progress and Updating

Question 10

Five Responsibilities of a Fiduciary:
1. To put a client's interests first
2. To act with utmost good faith
3. To provide full and adequate disclosure of all material facts
4. Not to mislead clients
5. To expose all conflicts of interest to clients

Accepted Answer

LO 1-5: The Fiduciary Standard

Answer

LO 1-3: Defining the engagement

Answer

LO 1-5: Four E's to becoming a CFP

Answer

LO 1-1: Areas of financial planning