Fundamentals Practice Exam and Subtopic Quizzes missed questions

Which of the following are included among the tools available to the Federal Reserve (the Fed) to accomplish its responsibilities? I. Open market operations. II. Deficit spending. III. Discount rate change. IV. Treasury bill issuance. a. I and III only. b. I, II and III only. c. I, III and IV only. d. I, II, III and IV.

A -IV is not correct because the FED does not issue T-bills, they buy or sell them (which is open market operations)

For many years, Samuel has been employed as a financial advisor at a leading brokerage firm where he conducts suitability reviews and makes investment recommendations for his clients. He recently obtained his CFP® certification and has just signed an agreement with Thomas, a new client, for a comprehensive financial plan. According to the Code of Ethics and Standards of Conduct, all of the following represent requirements for Samuel in his engagement with Thomas EXCEPT: a. Samuel must address if he has implementation responsibilities. b. Samuel must act as a fiduciary in his relationship with Thomas. c. Samuel must disclose to Thomas the existence of any bankruptcy where Samuel was a control person. d. Samuel must provide Thomas with information regarding how Thomas pays for products, services and additional incurred costs including surrender charges and sales loads

A A is the best answer. Implementation is a required step, and only needs to be addressed in the beginning if it is specifically excluded from the engagement. B, C and D are required of any CFP® professional selling a financial asset or providing professional advice.

Which of the following would most likely indicate that interest rates will rise in the future? a. An increase in consumer confidence. b. A decrease in the federal deficit. c. An increase in manufacturer inventories. d. A decrease in the demand for credit.

A B is incorrect. A decrease in the federal deficit may indicate that government spending has declined or taxes have increased. Both of these events reduce the money supply. This would not specifically cause interest rates to rise. C is incorrect. When inventories increase, that generally indicates consumer spending has declined. A decline in consumer spending would potentially lead to a decline in interest rates. D is incorrect. Interest rate levels are a factor of the supply and demand of credit. An increase in the demand for credit will raise interest rates, while a decrease in the demand for credit will decrease them.

Indranil is age 58 and has recently inherited $2,000,000 from his father. He has given two weeks' notice to his employer and would like to retire permanently. He has never previously mentioned his father's wealth, or a desire to retire, to his CFP® professional in any of their financial planning meetings over the years. What is the most appropriate next step for the CFP®professional? a. Evaluate the client's retirement assets and cash flow needs. b. Utilize Monte Carlo software to help establish an appropriate withdraw rate for the client. c. Encourage the client to recant their retirement until additional analysis has been completed. d. Revisit duties to be performed by the CFP® professional now that the client has retired.

A CFP Board Code and Standards states the planner is responsible for all steps in the financial planning process. If no limits to the scope are mentioned, there are none and you answer based on comprehensive financial planning engagement. Any significant change in assets would require returning the data gathering. A, B and C are important in the retirement planning process. However, revisiting the cashflow needs should be the starting point. The CFP® professional does not need to revisit the duties to perform since they have a comprehensive planning relationship already.

Which of the following are included in the first step of the financial planning process (Understanding The Client's Personal and Financial Circumstances ) I. Identifying Potential Goals II. Obtaining Qualitative and Quantitative Information. III. Analyzing Information IV. Addressing Incomplete Information a. II, III and IV only. b. I, II and IV only. c. II and IV only. d. I , II, III and IV.

A Elements II, III and IV are required in the first step of the financial planning process. Step 1 included analyzing information, not to be confused with Step 3, Analyzing the Client's Current Course of Action. Element I - Identifying Potential Goals, should occur in the second step of the planning process (Identifying and Selecting Goals).

Harry and Deidre Salinger are both age 59 and plan to work to age 65. They have been filling their "bucket list" with all of the things they plan to do in retirement and are really looking forward to getting started on it, but are also concerned about outliving their money. They have saved diligently in their company's 401(k) plan. In addition to the 401(k)s, the Salingers each have variable universal life insurance policies with $50,000 of cash value. They maintain their checking and savings accounts at the bank where Deidre works, and have a total of $35,000 in those two accounts. The Salingers have asked you to guide them regarding their asset allocation in the 401(k) plans and whether they can afford to retire at 65 and do the things on their bucket list. Which of the following is the most important piece of additional information that you will need to gather to assist them with these issues? a. Investment risk tolerance b. Summary of current income and expenses c. Copy of their tax return d. Whether either of their employers offers continuation of health insurance benefits for retirees

A In order to determine the appropriate asset allocation, you must have an understanding of the client's risk tolerance. Risk tolerance is also necessary to make assumptions regarding investment return, which will affect the analysis of whether they can afford to retire at age 65 and live the kind of lifestyle they desire. Answers B and C are other items of information you will need to gather to complete the financial plan, but in terms of the question being asked, A is the most important piece of additional information. D would be least important because if they retire at age 65 as planned they will be eligible for Medicare.

Sorel Parks, CFP®, met with Dorian and Griffin, Dorian's father. During the meeting, Sorel entered into an oral agreement with Dorian to manage Griffin's financial affairs. Sorel did not complete a client profile of Griffin. Sorel offered to review and make recommendations on Griffin's then-current living trust. Sorel prepared a Last Will, Revocable Trust and Durable Power of Attorney for management of Property and Personal Affairs, and charged Griffin $400 per hour for preparing the documents. Griffin had not requested such documents. Griffin asked Sorel to provide him with all the documents pertaining to his investments. As of the hearing date with the Disciplinary and Ethics Commission, Sorel had not provided the requested documents to Griffin. The Commission issued an Order to Revoke Permanently Sorel's right to use the CFP®, CERTIFIED FINANCIAL PLANNER™ and certification marks. The Commission ordered Sorel to verify that he was not using the marks by submitting copies of letterhead and business cards within 30 days of the Order. To comply with the Code of Ethics, before providing any services to Griffin, Sorel was required to take which of the following steps: a. Review implementation responsibilities with Griffin. b. Understanding The Client's Personal and Financial Circumstances by Obtaining Qualitative and Quantitative Information c. Provide information to a client outlined in Duties to a Client including but not limited to How the client pays for products, services and additional incurred costs including surrender charges and sales loads. How the CFP® professional and their firm are compensated for providing products and services. d. Analyzing the Client's Current Course of Action and Potential Alternative Course(s) of Action prior to making any financial planning recommendations. d. Sorel must do all of the above.

A It is important to understand the steps in order and identify what step they are currently in; the step that comes before and after the step that comes after. The question asked what should have happened before providing services (implementation). Remember the acronym UIADPIM. The plan should have been presented to the client and next steps/responsibilities addressed. Implementation responsibilities are done after the client agrees to one of the courses of action the CFP® professional has presented. Duties owed to clients (10) outlines information that must be provided to a client when a CFP® professional is providing financial advice or engaging in financial planning. This information must be provided prior to the process beginning. B is the first step of the active financial planning process and comes after item C. D is a step in the planning process that comes after Information is provided.

Mary is a CFP® professional and is in the Analyzing the Client's Current Course of Action and Potential Alternative Course(s) of Action step of the financial planning process. Mary is developing a capital needs analysis for her client and has established assumptions for tax rates, investment returns and inflation rates. Her client disagrees with Mary's assumptions regarding inflation and other economic variables used in the retirement needs analysis calculation. What should Mary do next? a. If Mary and her client are unable to agree on the assumptions used for the retirement capital needs analysis, Mary should limit the scope of the engagement and exclude retirement capital needs analysis from her recommendations. b. Mary should use the assumptions that result in the most conservative recommendations for retirement funding. c. The CFP Board's Standards of Professional Conduct require Mary to disengage from the client. d. Mary should provide her client with multiple projections, consistent with all varying assumptions

A The best answer is A. Mary can continue with the client. The principle of integrity allows for differences of opinions with client relationships. However without the client and planner agreeing to an outcome Selecting and Implementing Actions, Products, or Services (Practice standard 6.d) would be inappropriate.

Becky is 55 years old and has decided to purchase a tract of land which will be used for her retirement home. She plans to start construction in five years when she retires. She owns her current home outright, and her other assets consist of a $3,000 checking account, a 401(k) plan, and some personal assets. Which of the following represents the best alternative for Becky to pay for the land purchase? a. Home equity loan. b. Margin loan. c. 401(k) loan. d. Construction loan.

A The home equity loan would be the best alternative for the current land purchase. A construction loan may be difficult to obtain and is typically a very short-term loan (one year or less). Since she is not starting construction for five years, the home equity loan would be a better option. She cannot take out a loan (or have a loan) while retired. She is not starting the building until she retires. The typical rate on a 401k loan is 8%, home equity loan is much lower and can be paid back in 10 years

As a rule of thumb, it is best if consumer debt does not exceed: a. 20% of net income. b. 20% of gross income. c. 3 to 6 months of expenses. d. 36% of gross monthly income

A This is a rule of thumb, consumers should not be spending more than 20% of their take home pay (net income) on consumer debt (credit cards). This rule of thumb should factor along with the other recommendations for housing debt to be limited to 28% of gross income, and total debt not to exceed 36% of gross income. Total debt is different than CONSUMER debt

In engagements where financial planning services are to be provided, which of the following is not required to be provided to a client? a. Disclosure of reasonable and customary fees paid for custodial services. b. Any arrangement by which someone who is not the Client will compensate or provide some other material economic benefit to the CFP® professional, the CFP® Professional's Firm, or a Related Party for the recommendation or Engagement. c. How the client pays for products, services and additional incurred costs including surrender charges and sales loads. d. Existence of any bankruptcy, public discipline and locations of any Self Regulatory Organization (SRO) or government websites where the CFP® professional is a control person.

A Duties owed to clients require disclosing referral benefits, how products will be paid for and existence of any bankruptcies. Reasonable and customary fees for custodial services are not sales based compensation (12.b.ii) and are not required to be specifically disclosed.

Your client is 85. While going through her financial plan with her you think she is showing signs of incapacity. You believe the client may not understand your recommendations. What do you do? a. contact attorney b. coordinate with other adivers c. go back and start over d. continue with the engagement

A- simply by process of elimination makes it the right answer coordinate with other advisors-> not as good as an attorney go back and start over-> if mental incapacity, going back won't help continue with engagement is obviously bad

For purposes of the Free Application for Federal Student Aid (FAFSA), which of the following is/are considered includible assets? I. Cash. II. Life insurance. III. Investment real estate. IV. Annuities. a. I and III only. b. III and IV only. c. I only. d. I, II, III, and IV.

A-> FAFSA assets: money in cash, savings, checking businesses investment farms real esatate investment other investments FAFSA does not include these as assets: personal residence life insurance retirement plans (401ks, IRAs, annuities, pension funds, etc)

All of the following are part of the Code of Ethics except: a. A certificant shall refrain from borrowing or lending money and commingling financial assets. b. A certificant shall act in the client's best interest. c. A certificant shall not engage in conduct, which reflects adversely on his integrity or fitness as a certificant. d. A certificant shall exercise Due Care.

A-> A certificant shall not borrow or commingle funds as stated under the Standards of Conduct. The question was asking about the Code of Ethics.B, C and D are all in the Code of Ethics.

Which of the following statements are true regarding the CFP Board's Code of Ethics and Standards of Conduct? a. The standards apply to all CFP® professionals at all times, regardless of the insurance or securities licenses or registrations held. b. The standards are waived when CFP® professionals are limited to proprietary products. c. The standards apply to all CFP® professionals unless they hold another license or other registration. d. The standards apply only to CFP® professionals who provide financial planning or material elements of financial planning.

A-> CFP must follow code of ethics when providing professional services

John, age 25, is a CFP® professional and is opening his own financial planning practice next week. John is concerned about minimizing his risk of loss of personal assets resulting from liability associated with his practice. What should John do to minimize his risk of loss of personal assets? a. John should follow CFP Board guidelines on acting as a fiduciary with a duty of care, loyalty and following client instructions. b. John should form a multi party LLC to insulate liability. c. John should purchase a general liability insurance policy and an errors and omissions policy. d. John should use a suitability standard when evaluating and recommending investment alternatives, and other financial planning advice, for clients.

A-> acting as a fiduciary will put his clients first and inherently protect John. Insurance is a reactive protection, so it will only help protect his assets, not the risk of assets. B, C, D are all reactive, whereas A is proactive

Mitt, age 25, is a CFP® professional and is starting his own financial planning firm. Mitt is licensed in his state to sell insurance and has passed all appropriate security exams to sell investment securities. Mitt's compensation model is to not charge clients for creating a financial plan, but he will receive commissions based on any products he sells clients as part of implementing his recommendations. Mitt anticipates, that he will sell various insurance policies through limited engagements, as he builds his financial planning practice. According to the Code of Ethics, when would Mitt be engaged in financial planning? a. If a client is under the impression Mitt is providing financial planning services, Mitt must follow the CFP Board practice standards. b. Selling either a mutual fund or insurance product will result in Mitt being engaged in financial planning. c. As a CFP® professional, engaging in providing brokerage and insurance products require Mitt to charge a financial planning fee. d. Based on Mitt's compensation model of "sales related compensation", he is at all times engaged in financial planning when working with a client.

A. If The Client has a reasonable basis to believe the CFP® professional will provide or has provided Financial Planning and must follow the CFP Board practice standards. Selling products does not require Mitch to charge fees (C) or immediately cause a financial planning relationship to occur (B). D is incorrect as well, compensation model does not dictate the nature of a planning engagement.

Which of the following is/are true regarding registering as an investment adviser? I. No one is exempt from the fraud provisions in the Uniform Securities Act. II. Accountants do not need to register under the Investment Advisers Act of 1940. III. Bank holding companies must register under the Investment Advisers Act of 1940. IV. Brokers with more than 2 clients in a neighboring state must register in that state. a. I only. b. I and II only. c. II and III only. d. II and IV only.

B

Today, Walter is submitting his Initial Application for CFP® certification with the CFP Board of Standards. Four years earlier, Walter signed a Letter of Acceptance, Waiver and Consent with FINRA, as part of FINRA arbitration hearing. As part of the arbitration settlement, Walter consented to a 30-day suspension, a fine of $100,000 and 20 hours of continuing education. Which action is most appropriate for Walter to take when completing his Initial Application for CFP® Certification? a. Walter cannot disclose the FINRA arbitration because if he reports the arbitration to the CFP Board, he would be violating duties owed to clients (9- confidentiality) by disclosing confidential client information. b. Walter should disclose the FINRA arbitration to the CFP Board. c. Walter may disclose the FINRA arbitration, but is not required to disclose the arbitration, because the matter was settled more than five years prior to Walter applying for initial certification as a CFP® Certificant. The Candidate Fitness Standards look back period is up to five years. d. CFP Board Practice Standards require Walter is to disclose any and all arbitration, civil or criminal suits.

B According to Anonymous Case History #16726 by not reporting the FINRA arbitration settlement, the candidate for CFP® certification violated their Obligations to Clients (2 b- Integrity) A CFP Professional may not professionally engage in conduct to defraud, make any untrue statement, omission, mislead or engage in fraud or deceit. Answer A is incorrect, obligations to CFP Board require disclosure and reporting. The infraction is greater than $2,500 and not considered "Minor" (Duties owed to CFP Board 1 g.) C is incorrect fitness standard look-back elements apply to criminal events not financial events. D is incorrect the practice standards do not govern confidentiality and disclosure, those elements are controlled by Duties to CFP Board and Duties to Clients.

Bob is a CFP® professional and has entered into a signed engagement letter to provide a limited scope of engagement for financial planning to a client. Once Bob has made the insurance and investment recommendations, the client chose another planner for implementation of Bob's plan. Six months after Bob provided a client with his recommendations, the client approached Bob about purchasing life insurance, which was one of the recommendations in his plan. Is Bob still engaged with the client? a. No, the engagement letter limited the scope of the services to be provided. Bob is no longer engaged in the financial planning process with the client. Bob is now selling product beyond the scope of the engagement. b. Yes, Bob is still engaged with the client because Bob previously established a professional relationship and is now providing implementation services to the client by selling life insurance. c. No, a planner is not engaged with a client when only selling a single product. The planner would be engaged if applying multiple steps in the financial planning process. d. Yes, because he provided financial advice and is considered engaged with a client

B According to the Code of Ethics and Standards of Conduct Bob is able to limit a scope and duration of engagement. Bob is required to follow through with the initial client recommendation unless the scope of engagement specifically relieves Bob of this obligation. A is not correct, Bob must state up front he will not be assisting with an insurance purchase. C is not correct Bob is engaged in financial planning. D is incorrect financial advice does not always constitute a financial planning engagement.

What are the responsibilities of a CFP® professional who does not have a client agreement to engage in financial planning? a. Perform transactional services for the client but do not receive any direct or indirect fee based compensation b. Limit the Scope of Engagement to services that do not require application of the Practice Standards, and describe to the Client the services the Client requests that the CFP® professional will not be performing c. Help the Client select and prioritize goals. The CFP® professional must discuss with the Client any goals the Client has selected that the CFP® professional believes are not realistic d. A CFP® professional must present to the Client the selected recommendations and the information that was required to be considered when developing the recommendation(s).

B B is one of the options provided to a CFP® professional who does not have a client agreement to engage in financial planning. A is irrelevant, compensation models do not impact practice standards. C and D are practice standards, which are not required if a CFP® professional is not performing financial planning.

Hannah currently has $715,000 saved. She will retire in 10 years and wants to take $100,000 income for 25 years at the beginning of each year. She also wishes to have $1,000,000 35 years from now to leave to her heirs. What is the internal rate of return needed to accomplish this? a. 6.99% b. 7.09% c. 7.13% d. 7.26%

B CFO=-750,000 CF1=0 F01=9 CF2=100,000 F02=25 CF3=1,000,000 F03=1 IRR=7.09% -Income needs to begin at the beginning of year 10, make end of year 9 the last year of inactivity

Cathy and John Gonnerman would like to retire in twelve years. At that time, they would like to have accumulated $350,000 in today's dollars. To achieve this goal, they plan to invest a sum at the end of each year that will remain constant in purchasing power. They anticipate average inflation at 6% and have an after tax investment earning capacity of 9%. What payment is required at the end of the first year for them to reach their goal? a. $34,806.25 b. $26,394.63 c. $27,978.31 d. $50,104.88 e. $45,563.97

B N=12 i=[(1.09/1.06)-1] × 100=2.83 PMT=? FV=350,000 PMT=24,900 PMT at end of year 1: 24,900*1.06=26,394.63 Since the payment you solved for is made at the end of the period (one year from today), we need to account for the year of inflation before we make the first payment. The calculator inflates from the first payment forward, it does not account for the time between today and the first payment.

Which of the following is not a Conflict of Interest that must be disclosed? a. The offering of proprietary products and Material limitations on the universe of products. b. The CFP® professional's public disciplinary history. c. The receipt of additional compensation when the Client increases the amount of assets under management. d. Receipt of third-party payments for recommending products.

B Public disciplinary history must be disclosed to a Client when providing Financial Advice, but it is not an example of a Conflict of Interest

The husband of one of your clients had his wallet stolen. He had five credit cards in his wallet when this occurred. He reported the cards as missing the next morning, but the following transactions had already occurred: (Discover Card - $350) (MasterCard - $100) (VISA - $425) (Sears - $25) (Marshall Fields - $685) What is the client's liability for the fraudulent transactions on these cards? a. $50 b. $225 c. $250 d. $1,235

B The maximum on any missing card that the client would have to pay would be $50. But remember the thief only charged $25 on the Sears Card. Therefore, the total is 4 cards times $50 plus $25, which equals $225. The rules are different when the card number, not the card, is stolen.

Gwyneth currently earns a salary of $30,000 per year with ABC Company. She has the opportunity to attend a full-time training program for two years, if she is willing to quit her job and forgo her current salary. If she chooses to attend the training program, she will earn a salary of $40,000 per year after graduation, for the next 18 years. The cost of the training program is $9,000 annually. Gwyneth is currently earning a 6% rate of return on her investments, and inflation is 3%. Gwyneth will be unable to earn any income while she completes the training. What is the net present value to Gwyneth if she chooses to attend the training program? a. $26,354. b. $57,739. c. $116,890. d. $461,645.

B This problem requires utilizing an uneven cash flow function on a financial calculator. Time Period 0 (-9,000 and - 30,000) outflow - Gwyneth is not working and will forsake the $30,000 she could have earned as well as pay training costs of $9,000. The total cash outflow is $39,000. Time Period 1 (-9,000 and - 30,000) outflow - Gwyneth is not working and will forsake the $30,000 she could have earned as well as pay training costs of $9,000. The total cash outflow is $39,000. Time Period 2-19 - $10,000 inflow (18 years - Gwyneth will give up a salary of $30,000, but instead will earn $40,000 for 18 years. Therefore, her net increase in income is $10,000 per year if she attends the training program) I/YR - (1+.06)/(1.03) - 1 x 100 = 2.9126 [utilizes an inflation adjusted rate of return] NPV - $57,739.

Virginia created a Section 529 plan for her granddaughter Molly. Currently, the account has sufficient funds to pay for one year of Molly's college expenses. Which of the following would qualify Molly for the most financial aid? a. Paying for Molly's first year of college with Virginia's 529 plan assets. b. Paying for Molly's last year of college with Virginia's 529 plan assets. c. Transferring ownership of the Section 529 plan to Molly. d. Transferring ownership of the Section 529 plan to Molly's father.

B -> Section 529 plan assets owned by a grandparent are NOT included in a FAFSA calculation-> only the distribution is. Therefore, waiting to distribute the assets would allow them to grow and not jeopardize financial aid in Molly's first years at college

Mrs. Hoffman is an 80-year old widow whose liquid assets are on deposit at a small FDIC-insured bank. She has the following on deposit: - $75,000 in various Certificates of Deposit - $50,000 in a Money Market Mutual Fund - $200,000 in an IRA Rollover - $25,000 Passbook Savings (Joint with son) - $25,000 Checking Account (Joint with daughter) How much is currently insured by the FDIC? a. $100,000 b. $125,000 c. $250,000 d. $375,000

B- notice is says how much is currently insured by the FDIC, not how much is insured by FDIC for Mrs. Hoffman 75k CD covered, MM mutual fund NOT covered, IRA rollover not covered since we don't know if its invested in stock, bonds, etc. Both joints are covered So total FDIC is 75K+25K+25K=125K if it was asking for FDIC coverage of Mrs hoffman, would be A (the 75K CD and 12.5K for each joint account- total of 100k)

Which one of the following statements is not true regarding insurance planning for an individual with special needs? a. Term insurance is not the best choice for life insurance protection due to long term needs. b. In calculating the death benefit of the policy, one generation's need is considered. c. The individual with special needs should not be named as a beneficiary. d. Life insurance can be purchased in a trust that will benefit an individual with special needs.

B-> 2 generations should be considered (the generation of the child w special needs and the generation of the parents)

Snidely, a CFP® professional, met with Dudley and Geezer, Dudley's father. During the meeting, Snidely entered into an oral agreement with Dudley to manage Geezer's financial affairs. Snidely did not complete a client profile of Geezer. Based on Snidely's advice, Geezer liquidated his personal savings account and issued a personal check for the same amount payable to Snidely's company ("Company"). Snidely cashed the check in the Company's account and did not create a separate account for Geezer. On Snidely's advice, Geezer later liquidated his money market account and gave the proceeds to Snidely to manage. About six months later, Snidely opened an escrow account on a deed of trust using a check made out to Snidely and the Company. Geezer did not authorize the opening of the escrow account. Geezer subsequently stopped receiving monthly distributions from a broker-dealer acting as custodian of Geezer's assets as a result of Snidely's failure to properly fund the account. On April 1, Geezer asked Snidely to provide him with all the documents pertaining to his investments. As of July 10, the hearing date with the Disciplinary and Ethics Commission, Snidely had not provided the requested documents to Geezer. The Commission issued an Order to Revoke Permanently Snidely's right to use the CFP®, CERTIFIED FINANCIAL PLANNER™ and certification marks. The Commission ordered Snidely to verify that he was not using the marks by submitting copies of letterhead and business cards within 30 days of the Order. Snidely violated all of the following provisions of the Practice Standards EXCEPT? a. Engaged in conduct which reflects adversely on his integrity and fitness, upon the marks and upon the profession. b. Failed to return the client's original records in a timely manner since he exceeded the 3 month time limit following the client's request. c. Entered into a financial planning engagement with Geezer without gathering sufficient information to meet Geezer's needs and objectives. d. Failed to exercise reasonable and prudent professional judgment because he failed to clearly outline the scope of the engagement with Geezer. e. Snidely violated all of the above.

B-> CFP owes duty of diligence-> timely and thorough manner, there is no 3 month limit

Federal authorities govern the insurance industry in the following instances and manner: I. The federal government NEVER influences insurance regulations. That is left to the individual states. II. Through the Internal Revenue Codes. III. Through the Securities Exchange Commission. IV. Through the Employees Retirement Income Securities Act. a. I only. b. II, III and IV only, c. III and IV only d. II and IV only.

B. I is false IF the insurance company wants to offer extra benefits II-> if insurance companies want to keep tax benefits, they must follow rules of IRS III. if policy is variable, then the SEC governs the investments IV. if policy is employee benefit, its regulated by ERISA

Paul Simmons has passed the CFP® exam but not yet satisfied his experience requirements to become a CFP® professional. Paul recently had his series 6 license suspended by FINRA for five years. The cause of suspension relates to an unsuitable annuity sale to a client. Which of the following statements is correct regarding the ability of Paul to achieve his CFP®certification? a. Paul will be able to receive the CFP® certification upon satisfying his experience requirement. b. Paul will be barred from receiving his CFP® certification because of his suspension. c. Paul will be barred from receiving his CFP® certification unless he petitions CFP Board's Disciplinary and Ethics Commission. d. Paul will automatically receive the CFP® certification at the time his FINRA suspension is lifted.

C

A young couple, John and Mary Bartlett, are thinking about purchasing a new home using one of the following mortgages: Mortgage #1 - 8.5% interest with 4 discount points to be paid at the time of closing. Mortgage #2 - 9.5% interest with 2 discount points to be paid at the time of closing. Assuming the couple qualifies for both mortgages, which of the following aspects should be considered in deciding between these two mortgages? i. Gross income of the couple. ii. Estimated length of ownership. iii. Real estate tax liability. iv. Cash currently available. a. I and II only. b. II only. c. II and IV only. d. I, II, III and IV.

C -since it states they qualify for both mortgages-> gross income is not needed. Real estate taxes are the same REGARDLESS of their financing

Sidney, a CFP® professional, has been working with his new client Rachel over the last few months. He has completed all required disclosures and provided all written documents required for a financial planning engagement. After gathering and analyzing Rachel's financial information, Sidney developed and presented a comprehensive financial plan. Rachel agreed with most of his recommendations, but wants her uncle, a local attorney, to implement the estate planning components of the plan, rather than an attorney that Sidney normally works with and trusts to do a thorough job. Sidney does not know Rachel's uncle and is unfamiliar with his qualifications. According to the Practice Standards of the Code of Ethics, Sidney could take all of the following actions EXCEPT: a. Contact Rachel's uncle and coordinate the delivery of any information needed to implement the estate planning component of the plan. b. Inform Rachel that if she used her uncle for estate planning he would need to restrict the scope of the engagement to exclude responsibility for the estate planning implementation. c. Inform Rachel that if she used her uncle for estate planning, Sidney is required to have the documents reviewed by a qualified planning attorney to ensure they are legal and accurate or Sidney may need to terminate the engagement. d. Inform Rachel of the name, contact information and the expertise and credentials of his attorney, and ask her to consider using his services rather than her uncle because Sidney believed his expertise would be valuable to Rachel.

C A CFP® professional is not required to have the documents reviewed, but it would be in the best interest of the client (Duties to Client 8 - Complying with the Law). A CFP® professional may not intentionally or recklessly participate or assist in violation of these standards or the laws, rules and regulations governing professional services. Sidney may be acting recklessly if he does not push for Rachel to have documents reviewed by a qualified estate planning attorney. A is a correct statement as Sidney does need to follow the clients instructions and wishes. B is a correct statement, Sidney should comply with Rachel and provide the information requested, but does not need to be part of the implementation. D is a correct statement as Sidney should explain that a credentialed attorney in the area of planning she needs would be in her best interest, but will follow the client's wishes.

Your client has asked you to assist her in examining possible funding methods for her daughter who is planning on attending graduate school for her MBA. Which of the following can you advise your client is/are available to assist in covering expenses? I. Perkins Loan II. Supplemental Education Opportunity Grant III. Supplemental Loan for Students (Stafford Unsubsidized) IV. Parent PLUS Loan V. Lifetime Learning Credit a. I and II only. b. III and IV only. c. III only. d. II, III and V only.

C No grants are available to graduate students, only loans. Lifetime Learning Credit is a credit for tax purposes, not financial assistance direct for education. Parent PLUS Loans are loans for parents to pay for undergraduate course work. Graduate parent loans are available for graduate school, but is not an answer choice. Perkins loan program ended September 2017.

A principal in your financial planning office, who is a CFP® professional, has been tried and convicted of securities fraud and malfeasance of funds by virtue of the fact that he commingled client funds with funds of the financial planning firm and with his own funds, as well. The CFP Board Code of Ethics prohibits a CFP® professional from doing such. As a result, which of the following is the CFP Board likely to undertake? a. Private censure. b. Public letter of admonition. c. Revocation. d. Temporary suspension of right to use the marks (up to 5 years). e. The CFP Board has no jurisdiction in this case, as it is a matter for the SEC to determine.

C The Board could use suspension, but since it seems to be an offense that has been ongoing, and not an error or misjudgment, it is far more likely to go with the revocation in this case. The Board does have jurisdiction over its own, and the other options are simply too light for the level of offense.

Sean, a CFP® professional, and Alice worked together at Big Money Advisory Firm. After Alice was terminated by the firm, she asked Sean to retrieve some of her files to provide Alice access to her personal records. Alice's clients had not given permission for their information to be shared with Sean. Sean removed Alice's files from the office without the knowledge or permission of Big Money's owner. According to Big Money's owner, the files at issue were client files that, as the broker of record, the firm was required to retain for seven to ten years. Sean was terminated when Big Money's owner discovered the files were missing. According to the Code of Ethics, which of the following statements are true? a. No violation of the Code of Ethics occurred since Alice was not a CFP® professional and no client information was disclosed to a third party by Sean. b. Sean violated the Duty of Confidentiality and privacy owed to Alice's clients. c. Sean violated Duties owed to his firm (2) by not Complying with Lawful Objectives of CFP® Professional's Firm d. Big Money Advisory Firm violated the Duty of Confidentiality and privacy owed to Alice's clients.

C The Commission determined that by removing confidential client files without first obtaining the permission of the client or Sean's employer, Sean violated the confidentiality agreement of his employer. The Commission issued a Private Censure to Respondent and directed Respondent to complete five hours of continuing education in Ethics, in addition to the two hours in Ethics required to maintain his certification. The Commission considered as a mitigating factor that Respondent acted upon a reasonable request by a colleague to retrieve her personal files. A is false since the issue wasn't the disclosure of client information, but the violation of a certificant's legal obligation to his employer. B is false because Sean did not disclose client information. D is false because the CFP Board certifies individuals, not firms, and imposes no obligations upon firms.

Which of the following, when proactively put in place, will help maximize funds available when dealing with a crisis event? a .Emergency Funds b. Estate Planning Documents c. Life Insurance d. Investment Portfolio

C While all the answer choices provided could help if in place prior to a crisis event, the life insurance would MAXIMIZE the amount available if death of a loved one was the crisis event. There are many other types of crisis events. While life insurance is the most obvious for maximization, Auto, home and umbrella policies would be the same concept. Paying a small amount in premium in comparison to the larger death benefit would provide additional funds for final expenses, adjustment period, and future expenses (college, home, etc). Examples of Maximizing dollars: Paying $100-$200 a year for an umbrella policy that provides $1,000,000 in coverage is the same concept of maximizing available funds. Paying an annual premium for health insurance that would greatly help cover a $250,000 surgery. Paying $2,000 a year for a Long Term Care Policy that provides you 3 years of nursing home coverage at $10,000 a month ($360,000 over all)

Regulation Z, issued by the Federal Reserve Board, is a part of the Consumer Credit Protection Act. Regulation Z requires that: a. Lenders must disclose the items purchased. b. Lenders must be given a "cooling off" period. c. The dollar amount of finance charges and the annual percentage rate be disclosed. d. The length of time to pay the debt be disclosed.

C With the advent of Regulation Z, consumers were able to see the actual cost (including finance changes) that they were paying in any transaction they were making.

A client complained about a CFP® professional because he took too long to do something and the client lost 10% of his investment in a stock. Who does the CFP® professional have to report this complaint to? a. CFP Board b. FINRA c. His manager d. The Securities and Exchange Commission

C The manager should be notified and the firm will take appropriate steps to resolve the issue with the client, typically either through arbitration or negotiations. A is incorrect because the CFP Board must be notified when a CFP® Professional is charged, convicted or named in criminal, civil or regulatory action including the suspension of a professional license. B is incorrect because FINRA must be notified if there is a violation of securities law. D is incorrect because the SEC must be notified if there is a violation of securities law.

In accordance with CFP Board's Code of Ethics and Standards of Professional Conduct, which of the following must be in writing for financial advice and financial planning? a. Material Conflicts of interest. b. Investment policy statement. c. Privacy Policy. d. Monitoring responsibilities.

C- all the other are recommended to be in writing, but only the privacy policy is required

Esteban is 63, very wealthy and has one child from his current marriage with Tisha. He also has a child from a previous relationship that Tisha is unaware of. Esteban's investment portfolio and pension assets are held in a variety of accounts for which no overall plan has been developed. Esteban, has asked Ginger, a CFP® professional, to assist him in maximizing his children's inheritance while ensuring that Tisha is financially comfortable for the remainder of her life. All of the following items are relevant to determining if Ginger must follow the CFP Board's practice standards EXCEPT: a. Esteban believing he and Ginger have entered into a financial planning relationship. b. The extent Ginger and Esteban collaborate and integrate qualitative, quantitative data and Esteban's financial goals. c. Ginger's perception if she and Esteban have entered into a financial planning relationship. d. A written scope of engagement between Esteban and Ginger describing the relationship as financial planning.

C-> Gingers perception of the relationship does not have bearing on if she must follow the planning process

The provision that all credit reports are required to contain accurate, relevant, and current information is a part of: a. The Truth in Lending Act. b. The Consumer Credit Protection Act. c. The Fair Credit Reporting Act. d. The Fair Credit Billing Act.

C-> The Fair Credit Reporting Act (FCRA) allows individuals to challenge information deemed to be incorrect on their credit reports and provides for changing that info when the creditor does not respond within a specific time frame

Which of the following statements about the selected industry relative to its regulatory body and the relationship between the two are true? I. The insurance industry is primarily regulated by each of the 50 states. II. The majority of banks are subject to federal regulation by the Federal Reserve System and the Federal Deposit Insurance Corporation. III. Pension plan funds are primarily subject to federal regulation. IV. The organized stock exchanges, such as the New York Stock Exchange, are primarily regulated by the federal government. a. I, II and III only. b. I and III only. c. II and IV only. d. I, II, III and IV.

D

Ross is employed as a loan officer at a local bank. Ross recently sat down and visited with his financial planner Julie, a CFP® professional. Ross was in need of cash and borrowed $9,500 from Julie. Is Julie compliant with duties owed to clients, according to the Code of Ethics and Standards of Conduct? a. Yes, Julie is not in violation of her duties to clients because Ross is in the business of lending money b. No, Julie is in violation of her duties to clients because a CFP® certificant must never lend money to a client. c. Yes, Julie is not in violation of her duties because she loaned Ross less than $10,000. d. No, Julie has violated her duties to her clients by making a loan to Ross.

D A CFP® professional may not, directly or indirectly, borrow money from or lend money to a Client unless: i. The Client is a member of the CFP® professional's Family; or ii. The lender is a business organization or legal entity in the business of lending money. Ross is not a bank (making A incorrect). B is incorrect Julie can lend in some circumstances and C is incorrect.

Pilar's son was diagnosed with a medical condition that will require him to receive medical care, physical therapy, occupational, and speech therapy for the remainder of his life. She is gathering her expense receipts for her accountant. Which of the following may not be considered a medical expense for a special needs individual? a. Moving or modifying electrical outlets and fixtures b. Tuition for attendance at a special needs school c. Admission and transportation to a medical conference d. Management fees of special needs trust

D Choice D is an incorrect statement as management fees are not a medical expense. Choices A, B, and C are all medical expenses for an individual with special needs.

Mr and Mrs. Bellet have 9 year old twins together, Milly and Millan. Millan has special needs and is not anticipated to recover from the disabilities during life. The Bellet's have managed to grow their net worth upwards of a couple million dollars. Which of the following issue should they be least concerned with? a. Existing wills leaving the assets to the children equally per stirpes. b. Creating a $500k revocable trust with Milly and Millan as income beneficiaries and Milly as remainderman. c. Naming Milly as future guardian and Grandma as guardian of assets. d. Millan named as beneficiary for health, education, maintenance and support.

D Choice D is correct, naming an individual with special needs to a trust that provides distributions for only health, education, maintenance, and support will not effect the child's ability to qualify for federal or state benefits, therefore is of least concern to the parents. Choice A is incorrect as leaving assets through the will likely disqualify Millan for federal and or state benefits. Choice B is incorrect, the income generated from a revocable trust can jeopardize income based benefits. Choice C is incorrect, documents should be created naming a current guardian in addition to Milly being a minor. Concern may also include the grandmother as guardian as her age and longevity may not allow for time as a guardian.

Ralph, a CFP® professional, has been working with his new client Jack over the last few months. He has completed all required disclosures and provided all written documents required for a financial planning engagement. Jack is 32, married, and has 3 children. Ralph discussed Jack's insurance coverage following a thorough review of Jack's policies and recommended Jack purchase a disability policy, additional term life insurance through his employer and a personal liability umbrella policy. Ralph is in the process of performing a retirement needs analysis and developing an investment plan he believes will help Jack achieve his goals. While talking to Jack on the phone about his current company retirement plan, Jack mentioned that his father had been diagnosed with cancer and Jack thinks he and his sister might inherit a large sum of money sometime in the next couple of years because his father has more than enough money to provide for his second wife and still leave some to his children. Jack did not know the specifics of the estate and was uncomfortable contacting his father right now about the details. To comply with the Practice Standards of the Code of Ethics and Professional Conduct, Ralph's best course of action would be to: a. Contact Jack's sister to see if she know how much they would inherit so that Ralph would have adequate information upon which to form an opinion. b. Inform Jack that without more information on the potential inheritance Ralph will not be able to properly address his situation and restrict the scope of the engagement to the already completed insurance review. c. Inform Jack that without more information on the potential inheritance Ralph will not be able to properly address his situation and terminate the engagement. d. Inform Jack that a potential inheritance will possibly change scope and breadth of this engagement and monitor the engagement for a period of time as stated in the scope of engagement.

D D is the best course of action for Ralph. Jack's financial situation is fluid. Monitoring the situation as outlined in the practice standards would provide Jack with the best outcome. A potentially violates a CFP® professional's duty of confidentiality to a client. B and C are not required, financial planning is fluid and dynamic. Additional information or circumstances will always change a client relationship.

Ralph, a CFP® professional, has been working with Jack over the last few months. He has completed all required disclosures and provided all written documents required for a financial planning engagement. Jack is 32, married, and has 3 children. Ralph discussed Jack's insurance coverage following a thorough review of Jack's policies and recommended Jack purchase a disability policy, additional term life insurance through his employer and a personal liability umbrella policy. Ralph also performed a retirement needs analysis and developed an investment plan he believes will help Jack achieve his goals. To comply with the Practice Standards of the Code of Ethics and Professional Conduct, Ralph must provide all of the following information EXCEPT: a. How the client pays for products, services and additional incurred costs including surrender charges and sales loads b. A disclosure of economic benefit for referral or Engagement of additional persons as any are engaged in the process. c. The advantages and disadvantages of the recommended solutions along with the risks inherent in each alternative. d. Reiterate any material conflicts of interest in writing that Ralph has related to products being recommended even though they have been previously disclosed.

D Duties to the client (10) providing information require that A and B are provided. C must be provided through the financial planning process standards. While D may be a great idea, it is not required by the Code of Ethics and Professional Conduct.

Tom, age 51, wants to purchase a small bus so he can conduct historical tours in his hometown on the weekends. The bus has a purchase price of $60,000. He has $15,000 in a savings account at his local bank, and a FICO score of 700. He works for a manufacturing company and has a current 401(k) plan balance of $120,000. Tom is committed to growing the tour business and believes he will be able to separate from his full-time job in approximately 18 months. Given this fact pattern, which one of the following represents the best option for financing the purchase of the bus? a. Make a $10,000 down payment from his savings account and finance the remaining purchase price over three years. b. Make a $5,000 down payment from his savings account, borrow $10,000 from his retirement plan, and finance the remaining purchase price over three years. c. Take $10,000 from his savings account and borrow $50,000 from his retirement plan to purchase the bus outright. d. Lease the bus for three years with an option to purchase at the end of the lease term.

D Leasing the bus will have a minimal impact on cash flow. A is incorrect. This will limit Tom's emergency fund and commit him to a high monthly payment. B is incorrect. This will limit both Tom's emergency fund and create two additional cash flows - one paying back the loan and a second on the bus. Upon separation of service the loan will need to be paid back sooner than anticipated. C is incorrect. This will eliminate a large portion of Tom's emergency fund and potentially jeopardize his retirement.

A young couple (both age 30) comes to the financial planner with the desire for assistance in improving their family's financial position. They have two healthy children, ages 3 and 6. The husband is a foreman for a manufacturer of auto parts. His current salary is $30,000 per year. The wife is a marketing professor for a state university. Her current salary is $40,000 per year. The couple recently purchased a riverfront home for $100,000 using their entire savings of $20,000 as a down payment. In addition to an $80,000 mortgage, the couple's only debt is an automobile loan having a balance of $12,000. Both husband and wife have very good family health insurance from their employers. The wife has employer-paid life insurance equal to two times her annual salary. The couple wants to start an investment program as soon as possible. To correct the weakness in their financial planning before beginning the investment program, the client should: I .Establish an emergency fund with stock mutual funds. II. Start a college savings fund for their children. III. Purchase disability insurance for the wife and the husband. IV. Have wills prepared for the wife and the husband. V. Secure credit life insurance for the auto loan. a. V only. b. I and II only. c. I and III only. d. III and IV only.

D Read the question carefully. It is asking what the client should do, not the planner. Option "I" is incorrect because an emergency fund must be liquid. Option "II" would be part of investing and the question asks for corrections, not investments. Option "V" is incorrect as the auto loan is small and is their only debt. Credit life is a life insurance policy tied to the amount owed on the underlying debt. The wife has insurance already; therefore, this is not a priority yet.

What would likely rise to the standard of a material conflict of interest, and need to be disclosed by a CFP® professional? a. That the CFP® professional recommended his personal accountant who gives the CFP® professional discounted accounting services. b. The CFP® professional received an undisclosed fee for a referral to a municipal bond broker. c. A client who is an attorney brought him a $50 fruit basket as a thank you for the referral. d. The CFP® professional gave the name of his lawyer (also a high revenue client of the CFP® professional) to one of his clients who was wishing to divorce his wife.

D Referring one client to another is rife with potential conflicts of interest. Especially if both clients provide active revenue for the CFP® professional. A is not the best answer, a discounted accounting service is a conflict of interest but not likely material. B is incorrect a fee paid by a broker is a conflict of interest, but not immediately material as the CFP® professional is a fiduciary. C is not material.

Cara has entered into a comprehensive planning engagement with Stan, a CFP® professional and registered representative. The letter of engagement that Cara signed indicates that Stan will monitor his investment recommendations on an annual basis, every June. In June of the current year, Cara received the update from Stan's annual review. In September of the current year, the mutual funds that Stan recommended experienced a 20% decline in value due to a market selloff. What additional responsibilities does Stan owe to Cara as a result of the poor investment performance? a. Stan must revise the asset allocation within 30 days. b. Stan must update the letter of engagement to include more frequent monitoring of the investment portfolio. c. Stan must return a portion of his fee since Cara's portfolio lost money. d. Stan has no additional responsibilities with respect to the engagement.

D Since the monitoring standards were established and agreed upon in the letter of engagement, and Stan has satisfied those responsibilities, he is under no further obligation to Cara. He could work with Cara to update the letter of engagement to include more frequent monitoring, but does not owe that duty.

A CFP® professional's client, Jim, was previously married and had 2 children. He set up an irrevocable trust for those two children, naming his brother Harry as the trustee. Jim remarries a woman named Laura who has no children. Laura comes into the CFP® professional's office saying that Jim is concerned about losing money in the trust due to the recent drop in the market, so he wants to change some things. What should the professional do? a. Provide her with the trading forms that will require Jim's signatures, allowing her to make the changes requested. b. Tell her that because she is not the trustee, she is not authorized to make any charges. c. Tell her that he will contact Harry, the trustee, and let him handle it. d. Contact Jim to discuss the meeting with Laura.

D The CFP® Professional owes a duty to the client, who is Jim. The Code of Ethics require the CFP® Professional to discuss Jim's concerns with Jim, not Laura. In addition, the conversation with Jim needs to address that Jim does not have control over the trust assets, the trustee does. A is incorrect because Jim is the client and the planner owes the duty of a fiduciary and confidentiality to Jim since Laura is not the client. B while true, the CFP® Professional should first tell Laura that Jim is the client and Jim should discuss his concerns, because the CFP® professional may only speak to the client about the trust. C is incorrect because the CFP® professional must talk to the client about the trust, not Laura or Harry, unless Harry instructs the CFP® professional differently.

Janice, age 42, recently graduated from college and began working for a soda bottling company as a marketing specialist. She worked as a staff accountant at a small accounting firm for 19 years before going back to school to get her Marketing degree. She earns $60,000 per year at her new job, and she feels as though she can use $1,500 of her income per month towards repayment of debt. Her debt includes a $110,000 student loan with an interest rate of 5% and a bank loan of $15,000 at 4%. She has a portfolio of stocks valued at approximately $500,000, with a cost basis of $400,000, and a 401(k) plan balance from her old job in the amount of $75,000, which she will be rolling into her new plan. She is in the 32% income tax bracket. Assuming she would like to pay off her student loans as soon as possible, what is the best option for a CFP® professional to suggest to Janice? a. Use the $1,500 per month toward the bank loan until it is paid off, then apply the $1,500 towards the student loans until they are paid off, at which time add any excess earnings to the investment portfolio. b. Use the $1,500 per month toward the bank loan until it is paid off, then apply the $1,500 towards the student loans until they are paid off, at which time contribute any excess earnings to the 401(k) plan with the new employer. c. Use the $1,500 per month toward the student loans until they are paid off, then apply the $1,500 towards the bank loan until it is paid off, at which time contribute any excess earnings to the 401(k) plan with the new employer. d. Sell a portion of the investment portfolio to pay off the student loans and bank loans, then contribute to the 401(k) plan with her new employer.

D The best option would be to sell the stock and pay off the debt. One of her main goals is to pay off the student loans and selling the stock and paying off debt and taxes would clear her from debt and allow her to utilize her free cash flow to enhance savings.

Herman is a CFP® professional and Registered Investment Advisor. A few weeks ago, he had been drinking at a happy hour, and was pulled over by the police while driving home. He hadn't realized his tire blew, and the rim of his tire caused damage to the road. He was charged with a DUI and fined $4,000 for damaging public roadways. Early this morning he was convicted. Assuming this is his second DUI conviction, which of the following statements is correct regarding Herman's responsibilities with respect to this conviction? a. He is not required to report the charges to CFP Board, and is not required to disclose the conviction on his Form ADV. b. He is not required to report the conviction to CFP Board, but must disclose the conviction on his Form ADV. c. He is required to report the conviction to CFP Board, but is not required to disclose the conviction on his Form ADV. d. He is required to report being charged and convicted to CFP Board and must also disclose the conviction on his Form ADV.

D DUIs (or any engagement in potentially problematic conduct listed in Standard E. 3) must be reported to CFP Board. The fine greater than $1,000 is the triggering factor on the first DUI under CFP Board Code and Standards. This must also be disclosed on his Form ADV and U4 if FINRA licensed.

Which of the following is necessary for a certificant to disclose to a client if providing financial planning? a. That you own 50% of a corporation. b. Your secondary education. c. The IRS has a lien on your personal property. d. An active FINRA license suspension

D- D is the best answer. A CFP® professional must disclose significant information to a client prior or when engaging in a financial planning relationship. This includes compensation information, how a client pays, disclosing conflicts of interest and Existence of any public discipline and locations of any Self Regulatory Organization (SRO) or government websites where the CFP® professional is a control person. A license suspension is an example of public discipline.

A husband and wife, who are both clients of the CFP, are having marital problems and they recently separated. The wife needs $5000 to pay a divorce attorney. They have a joint account with $150,000, the wife has her own IRA, and the husband has an investment portfolio. What should the CFP professional do next? a. don't give the wife money b. give the wife money for the attorney from their joint account c. split the joint account into 2 separate individually owned accounts d. bring them both in to revise the planning agreements

D- what should the CFP do NEXT is key->

Hershel, a client of Jonah, deposited $40,000 into a securities account at Jonah's firm. At the time, Jonah's only services to Hershel involved investment recommendations and executing transactions. Over the next two years, Jonah conducted numerous trades in Hershel's account without Hershel's approval, including during a month when Hershel was hospitalized. Jonah and the Firm received commissions from the trades that exceeded Hershel's initial deposit. By this time, Hershel's account was only worth $15,000. The New York Stock Exchange ("NYSE") initiated an inquiry regarding Hershel's matter. Jonah and the NYSE entered into a Stipulation and Consent to Penalty. Jonah consented to the following findings: 1. Respondent engaged in conduct inconsistent with just and equitable principles of trade when he: 1) recommended transactions in the accounts of a customer which were unsuitable in light of his investment objectives, investment experience and/or financial resources; and 2) effected excessive transactions in the accounts of a customer of his member firm employer; and 2. Jonah violated NYSE Rule 408(a) when he exercised discretion in the accounts of a customer without first obtaining written authorization from him. Following the events above, Jonah completed the requirements and became certified to use the CFP® marks. At his hearing with the Disciplinary and Ethics Commission, Jonah: ・ expressed a commitment to the financial planning process; ・ noted that his actions took place several years before he began to pursue CFP® certification; ・ had made changes to his practice to prevent similar occurrences in the future; and ・ advocated CFP® certification to employees under his supervision. Jonah's conduct violated all of the following provisions of the Rules of Conduct EXCEPT? a. A certificant shall treat prospective clients and clients fairly and provide professional services with integrity. b. A certificant may not intentionally or recklessly participate or assist in violation of these standards or the laws, rules and regulations governing professional services. c. A CFP® professional must be objective. A CFP® professional must exercise judgment that is not subordinated in the interest of the CFP® professional or others. d. At all times, when providing financial advice to a client, a CFP® professional must adhere to a fiduciary duty and act in the best interest of their client.

D-> Since at the time of the conduct Jonah was not a CFP® professional and was not engaged in financial planning, he was not held to the duty of care of a fiduciary to act in the best interest of the client. The Commission issued a Private Censure to Jonah and considered the mitigating factors Jonah provided at his hearing. All of the other Rules were clearly violated by Jonah.

Sam Peterson wants an additional $24,000 per year income after his retirement. Sam can earn 8% interest. How much will he need to invest to reach his goal? a. $192,800 b. $240,000 c. $277,835 d. $300,000

D-> Sam does not mention how he wants the money. He may want it either in terms of "capital utilization" (like an annuity) or "capital conservation" where the principle is never touched, only interest is used. Since Sam does not know how long he will live. With the information provided you could back into a number by figuring 24,000 income based on 8% of your answer set. This would be the capital conservation model. Or an easy step would be 24,000 / .08 = 300,000. A: $192,800 × 8% = 15,424 B: $240,000 × 8% = 19,200 C: $277,835 × 8% = 22,226 D: $300,000 × 8% = 24,000 he has decided to put aside $300,000 which at 8% interest will generate $24,000 per year indefinitely without touching the principal.

Jack, a new client for Robert, a CFP® professional, requests a needs analysis concerning Jack's life insurance situation. Jack is 42, married and has two children he plans to send to college. He wants Robert to evaluate how much and what type of insurance he should purchase. Which of the following is required to be provided to Jack according to the Code of Ethics? a. A written disclosure of all material conflicts of interest Robert faces prior to entering into a financial planning agreement. b. A notarized statement from Robert's compliance officer that Robert is free and clear of all material conflicts of interest. c. A form ADV showing that Robert is charging hourly fees, the only accepted compensation model allowed in a financial planning relationship. d. None of the above is required by the Code of Ethics.

D-> Code of ethics requires disclosure of conflicts of interest, but can be oral or writing

The estimated value of a real estate asset in a financial statement prepared by CFP certificate should be based upon the: a. basis of the asset, after taking into account all straight line and accelerated deprecation b. client's estimate of the current value c. value that a well informed buyer is willing to accept from a well informed seller where neither is compelled to buy or sell e. current insured value

D-> assets should be stated at fair market value (price that well informed buyers and sellers would accept)

Johanna Olsen, CFP, is duly registered under the Investment Advisers act of 1940. For which one of the following activities would this planner be in violation of the act? a. she received w clients knowledge both a fee for advice given and a commission from client transactions b. she included the cost of preparing the clients income tax returns as part of the annual fee charged the client c. she gave clients planning advice that was not achievable given the current economic conditions d. she distributed to clients the written disclosure Brochure 2 weeks after an IA contract was signed

D-> must be given within no more than 48 hours before or at time of agreement

You are a CFP® professional and you have been working with a husband and wife client over the past 5 years. The wife is 42 years old and her husband is 46 years old. They have a moderate risk tolerance for their investments. They have no children and are primarily planning for their retirement. Last week, the wife requested a private meeting between you and her. During this meeting she explained that over the past 3-6 months, her husband has become a compulsive gambler, often gambling illegally. As a result of significant gambling losses, he has depleted all retirement savings they managed to accumulate. She asked that you keep her meeting with you confidential and not disclose it to her husband. After reviewing recent financial statements, you determine that they are unlikely to reach any of their financial goals, due to the husbands gambling problem. According to the CFP Board's Code of Ethics, what should you do next? a. Disengage the client because you are unable to help them attain their goals. b. Contact the appropriate authorities regarding the husband's suspected illegal gambling activities. c. Contact the husband to inform him about the private meeting with his wife. d. Encourage the wife to seek professional help for her husband and continue working with the clients on their financial goals.

D->not required to disengage

Which of the following are available to full-time graduate students? I. Pell Grants. II. Subsidized Stafford Loans. III. Supplemental Education Opportunity Grants (SEOG). a. I only. b. II only. c. I and III only. d. None of the above

D. Pell Grant usually only awarded to undergrad who have high unment financial need. Subsidized Stafford loans are not available to grad students, ONLY UBSUBSIDIZED STAFFORD LOANS are available to grad students. SEOG is a grant for undergrad students with exceptional need.

Becca, age 24, applied for CFP® Certification. The Disciplinary and Ethics Commission denied her application because she had been convicted of second degree assault and battery and served nine months of her two year sentence in the county jail at the age of 18, while she was a member of a street gang. She has served her time, graduated from college and has decided to appeal the decision of the Disciplinary and Ethics Commission. All of the following are true regarding the review process EXCEPT: a. She must submit a written petition for consideration to Professional b. Review staff and sign a form agreeing to CFP Board's jurisdiction. c. Staff will review the request to ensure the transgression falls within the "presumed unacceptable" list. d. Her prior conduct falls under the "presumed unacceptable" category and therefore, she may appeal the denial of certification. e. The Disciplinary and Ethics Commission's decision regarding a petition for consideration is final. Solution: The

E-> The DEC's decision regarding a petition for consideration may be appealed to the Appeals Committee of the Board of Directors, in accordance with the Disciplinary Rules and Procedures. All the other statements are true.

A shift "up and to the left" of the supply curve occurs when: Some firms leave the industry. a. Government reduces regulations on production. b. The cost of inputs goes down. c. Taxes go down. d. Competition increases.

The supply curve shifts up and to the left, resulting in a decrease of a good or service being supplied, when firms leave an industry or market. When firms leave an industry, less of a good or service is produced at all price levels. -just think about how prices increase when competition decreases

David has won the Illinois state lottery. He must decide whether to receive annual payments of $250,000 at the beginning of each year for the next 20 years, or a lump sum payout. What lump sum amount does David need to receive to equal the $250,000 payments for the next 20 years, if he can earn an 8% return on his investments, assuming inflation is 3%? a. $2,454,537 b. $2,650,900 c. $2,875,900 d. $3,307,511

b This is a present value of an annuity due problem. So, N = 20, I = 8, PV = ?, PMT = 250,000, FV = 0. Put your calculator in BEGIN mode and solve for PV. Inflation is not necessary in this calculation, lotto winnings income streams will not increase for inflation, they are the equivalent to a fixed annuity.

A small business owner wants to create a business succession plan, but the CFP® professional does not have any experience with succession planning for small businesses. However, his colleague has extensive experience. What should the CFP® professional do? a. Turn down the engagement b. Disclose to the Client the use of a third party and prepare the plan, with the help of his colleague as a resource c. Explain to the business owner that it's outside the scope of his expertise d. Do the necessary research and figures out how to prepare a succession plan

b. The duty of competence requires the planner to either refer the client to an expert or bring an expert into the engagement. Preparing the plan with the help of an expert is acceptable under the Code and Standards. A is incorrect because the Code and Standards simply requires the planner to either refer the client to an expert or bring an expert into the engagement. C is incorrect because the planner can still accept the engagement, but must bring an expert into the engagement. D is incorrect because the principle of competence requires the planner to refer the client to an expert or bring an expert into the engagement.

Which of the following is not an integrating factor CFP Board will consider in determining if a CFP® professional has engaged in financial planning with a client? a. The number of relevant elements of the Client's personal and financial circumstances that the Financial Advice may affect. b. The net worth and income of the client and how those may be affected by the Financial Advice. c. The length of time the Client's personal and financial circumstances may be affected by the Financial Advice. d. The portion and amount of the Client's Financial Assets that the Financial Advice may affect.

b. The net worth and income of the client and how those may be affected by the Financial Advice. A, C and D are integration factors provided by CFP Board's Financial Planning and the Application of Practice Standards for The Financial Planning Process (4 a, b and c).

John is a CFP® professional and is engaged in the financial planning process with his client Frank. John is in the data gathering process and has collected bank statements, insurance policies, estate documents, and all other relevant information with the exception of tax returns. Frank refuses to supply the tax returns or any documents that support his income claims. John's best course of action is to? a. Disengage from the client until such time Frank is willing to supply tax returns or other documents to support his income. b. If John suspects that Frank is evading taxes or under-reporting his income, John is required by Duties to CFP Board to report his suspicions to the appropriate regulatory authorities. c. John should contact the IRS and request a copy of tax returns for the past three years, with or without the consent of the client. d. John may limit the scope of the engagement to recommendations for which he has sufficient and relevant information or disengage from the client.

d. John may limit the scope of the engagement to recommendations for which he has sufficient and relevant information or disengage from the client.