Calculations to Know

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? If a client is under the impression Mitt is providing financial planning services, Mitt must follow the CFP Board practice standards. Selling either a mutual fund or insurance product will result in Mitt being engaged in financial planning. As a CFP® professional, engaging in providing brokerage and insurance products require Mitt to charge a financial planning fee. Based on Mitt's compensation model of "sales related compensation", he is at all times engaged in financial planning when working with a client.

Solution: The correct answer 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 not one of the "buckets" of compensation the CFP Board states must be considered when determining compensation disclosure? Compensation the CFP® professional's other clients receive or are entitled to receive from any association with the CFP® professional 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. Disclosure of Economic Benefit for Referral or Engagement of Additional Persons

Solution: The correct answer A. Other answer options (B, C and D) are required to be provided to clients when a CFP® provides financial advice or financial planning services.

Jonathon got divorced in 2017 and subsequently had severe financial problems. Two years later he filed a chapter seven bankruptcy. After getting back on his feet, he graduated from college and got a job selling life insurance for a large national insurer three years following his bankruptcy. During his first year on the job, he received a large number of customer complaints, his insurance license was suspended for one month and he was discharged by his employer. During his unemployment, he completed all of the requirements for the CFP® certification. In August, four years following his bankruptcy, he made his application to the CFP Board. Which of the following is correct under the Board's revised policy regarding bankruptcy? Jonathan's behavior falls on the presumed unacceptable list and he will be denied the right to use the marks unless he files a successful consideration request with the CFP Board. Jonathan's behavior falls on the always bar list and he will be denied the right to use the marks. Jonathan's behavior will prevent him from applying for the CFP® certification for the five year period following his actions Jonathan's bankruptcy will be disclosed on the CFP® professional's public profile displayed on the CFP Board's website for 10 years. He will need to request a consideration from the Disciplinary and Ethics Commission for the suspension, but the bankruptcy will not be a factor in their decision.

Solution: The correct answer A. This answer was correct under the pre-October 2019 practice standards and remains correct under 2012 fitness standards. One complexity to the question rationale is that if Jonathan were to successfully petition the discipline and ethics committee, he would be required to report the bankruptcy to clients when providing professional services. An expanded rationale is below: A is correct under the revised Candidate Fitness Standards effective July 2012. Although the bankruptcy alone would not constitute presumed unacceptable behavior, it is a consideration when accompanied by any other behavior on the list, such as the suspension of his insurance license. B is not correct because revocation of a financial professional license is required to move to the always bar list. C is incorrect because there is no five year expiration period on the suspension of the insurance license D is not correct because although the bankruptcy alone would not constitute presumed unacceptable behavior, it is a consideration when accompanied by any other behavior on the list, such as the suspension of the insurance license.

Ralph, a CFP® professional and independent registered investment adviser, has been working with his new client Jack over the last few months. He has completed all required disclosures and provided all information 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. While presenting the retirement and investment plan, Jack mentioned that he was rejected for the life insurance for medical reasons that he does not wish to discuss with Ralph. To comply with the Practice Standards of the Code of Ethics and Professional Conduct Ralph must: Gather appropriate information from Jack's spouse to determine if Jack's condition may affect the retirement and investment plan. Inform Jack that without more information on his medical condition Ralph will not be able to properly address his situation and he would have to restrict the scope of the engagement to the already completed insurance review. Inform Jack that without more information on his medical condition Ralph will not be able to properly address his situation and he would have to restrict the scope of the engagement to the already completed insurance review and retirement and investment analyses. Inform Jack in writing that his medical condition could affect Ralph's conclusions and recommendations.

Solution: The correct answer B. B is the best answer. Ralph should encourage the client to share the cause of the rejection as a terminal issue would drastically change planning. Ralph is then required (Under element six of Financial Planning and the Application of Practice Standards for The Financial Planning Process) to not enter into an engagement, terminate the engagement, limit the scope of engagement or limit services provided to the client.

Ronald, a CFP® professional, has been invested in real estate rental properties for the past 15 years. Unfortunately, many of his properties have declined in value significantly and he has been unable to rent the properties. Four years ago, Ronald was forced into personal bankruptcy, due to his real estate investments. What is a likely action of the CFP Board, as a result of Ronald's personal bankruptcy filing? Include Ronald's name in a news release with other CFP® professionals that have filed bankruptcy within the past 7 years. The CFP Board reviews bankruptcies prior to certification, through the Candidate Fitness Standards. Therefore, there will be no further action by the CFP Board since Ronald is already certified. CFP Board disciplinary actions will consider if the bankruptcy was a result of Roland's inability to manage his personal finances. Immediate suspension of the CFP® marks for one year and one day.

Solution: The correct answer C. CFP Board will consider the bankruptcy. Roland can provide a rebuttal along with his disclosure showing the bankruptcy does not demonstrate an inability to manage responsibly the CFP® professional's or the business's financial affairs. A and D are incorrect CFP Board does not make immediate bankruptcy related decisions. B is incorrect active CFP® certificants must report control bankruptcies and may be subject to discipline.

Sally, a CFP® professional, was discussing the prior year's investment results with her long standing client Deidra as part of their semi-annual meeting to review the status and progress of a comprehensive financial plan Sally had developed for Deidra a number of years ago. The initial plan included a risk tolerance assessment of moderately aggressive for Deidra and over the years, her reactions to market ups and downs had supported this assessment in Sally's opinion. As a result, well diversified equity investments comprised about 70-75% of Deidra's portfolio, on average. It had not been a good year in the market. The S&P500 had declined slightly more than 30%, as the economic recovery faltered and concerns about the European debt crisis mounted. Deidra's portfolio lost 35% of its value over the last 12 months. Deidra became very concerned as she began to recognize the extent of the losses, and was bordering on becoming hysterical. As they talked, Sally discovered that Deidra had become pregnant, was getting married next month and had planned to use some of her investments to help support the family while she stayed home for the first six months of the child's life. According to the Code of Ethics and Standards of Conduct, Sally must take the following actions EXCEPT: Establish with Deidra whether her new husband will be added to their Financial Planning engagement. Sally must communicate to Deidra when she (Sally) will update financial planning recommendations Sally and Deidra must discuss the temporary change in income, and how to plan for it. Sally must modify the scope of the engagement based on Deidra's risk aversion. Sally must do all of the above.

Solution: The correct answer D. A CFP® professional would need to re-establish the financial planning engagement to add the new husband as a client. B and C are conversation that will need to be had as part of Monitoring and Updating. However a new scope of engagement is not required when a client changes their risk aversion.

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: 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. 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. Inform Jack that without more information on the potential inheritance Ralph will not be able to properly address his situation and terminate the engagement. 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.

Solution: The correct answer 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.

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

Solution: The correct answer is A. A certificant shall not borrow or commingle funds as stated under the Standards of Conduct.B, C and D are all in the Code of Ethics.

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.

Solution: The correct answer is A. 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.

Jennifer recently applied for CFP® Certification. Which of the following would "always" bar her from certification? Felony conviction of tax fraud or other tax-related crimes. One personal or business bankruptcy within the last five years. Suspension of a professional license. Felony conviction for non-violent crimes within the last five years.

Solution: The correct answer is A. Answers "B," "C," and "D" are on the "presumed" to be unacceptable list. Choice "A" is on the "always" bar list.

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: Review implementation responsibilities with Griffin. Understanding The Client's Personal and Financial Circumstances by Obtaining Qualitative and Quantitative Information 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. Analyzing the Client's Current Course of Action and Potential Alternative Course(s) of Action prior to making any financial planning recommendations. Sorel must do all of the above.

Solution: The correct answer is A. 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.

Jake contacted Robert, a CFP® professional who provides investment services and has worked with Jake in the past. He requested that Robert purchase 2,500 shares of DEF stock for Jake. The call came in at 1:32PM. Immediately following the call, Robert became seriously ill and was out of work for the next week. Upon his return, Robert executed Jake's purchase order, however, the stock had appreciated 11% during the week Robert was out. Which of the following statements is correct? A. Robert violated the CFP Board's Code of Ethics Duty of Diligence. B. Robert did not maintain the CFP Board's Financial Planning Practice Standards by executing Jake's purchase of DEF stock. C. Robert violated the CFP Board Code of Ethics Duty of Professionalism. D. Robert did not violate any CFP Board ethical guidelines.

Solution: The correct answer is A. Robert's illness is not an issue, but his execution of a trade (DEF stock) at a higher price may not have been the goal of his client. Robert should have contacted the client and confirmed the trade was still appropriate. Diligence requires services provided in a reasonable and prompt manner.

Which of the following individuals or entities is/are responsible for ensuring that CFP® professionals are adhering to CFP Board's Code of Ethics and Standards of Professional Conduct? I. The CFP® professional. II. The CFP® professional's employer. III. The CFP® professional's clients. A. I only. B. I and II. C. I and III. D. I, II, and III.

Solution: The correct answer is A. The CFP® professional is responsible for adhering to CFP Board's Code of Ethics Standards of Professional Conduct. However, the employer is not responsible for ensuring the CFP®professional adheres to CFP Board's Code and Standards. CFP Board certifies individuals, not firms.

Of the following situations, when should a pre-marital agreement NOT be considered by individuals contemplating marriage? When one or both parties are unwilling to make a full disclosure of all their income and assets to the other party. When each party has significant wealth and wishes to protect his/her financial independence. When there is a significant difference in wealth of each party. When one or both parties have ongoing obligations, rights and/or children from a previous marriage.

Solution: The correct answer is A. Without full disclosure of the assets of both parties, it is not possible to arrive at a fair arrangement for a prenuptial agreement. All other answers are suitable for premarital agreements.

When a CFP® certificant is unsure whether a specific service or activity rises to the level of financial planning, the best course of action is? Apply the practice standards as though the client had engaged in a financial planning engagement. Limit recommendations to a specific product. Require the client to sign a waiver of responsibility. Disengage from the client engagement.

Solution: The correct answer is A. A financial planner may always enter into a meaningful process with their client.

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

Solution: The correct answer is A. Choice "IV" - Issuing Treasury bills is the domain of the Treasury Department, not the Federal Reserve. Choice "II" - Deficit spending falls under fiscal policy which is governed by the executive and legislative branches of government, not the Federal Reserve.

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? Investment risk tolerance Summary of current income and expenses Copy of their tax return Whether either of their employers offers continuation of health insurance benefits for retirees

Solution: The correct answer is 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.

Kevin, a 55-year-old corporate executive, wants advice as to when he can retire. His current salary is $240,000 and he receives an annual bonus of $300,000; he also has annual stock options and restricted stock awards valued at $100,000. His employer contributes to a cash balance pension plan and matches his contributions to a 401(k). Kevin owns a whole life insurance policy with a $500,000 death benefit and is considering the purchase of a term policy with a $2,000,000 death benefit. He and his wife, Anne, also age 55, believe they can live on an after-tax income of $180,000. Assume a federal income tax rate of 35%. Kevin is in the 42% marginal tax bracket (combined federal and state). Kevin wants to contribute $100,000 towards his child's education in the next 3 years. Which of the following approaches minimizes his taxable gift (CFP® Certification Examination, released 8/2012)? Paying the college directly. Contributing the funds to a Section 529 Qualified Tuition Plan. Contributing to a Uniform Transfers to Minors Act (UTMA) account for the child. Contributing to a Coverdell Education Savings Account plan.

Solution: The correct answer is A. Paying the school directly does not utilize any annual exclusion or credit equivalent because this is a qualified payment. B is incorrect because the contributions over 3 years will exceed the annual exclusion amount. C is incorrect because it uses both the annual exclusion and credit equivalent, even with gift splitting. D is incorrect because he is not eligible to contribute due to his income level.

A married couple, who both work, recently had a baby. What should be their primary financial concern? To purchase life insurance To save up 3 months of cash reserves To prepare a long-term retirement plan To create an education fund for their child

Solution: The correct answer is A. Since both parents work, there is likely a need for both incomes. The biggest financial risk that they face is likely premature death of one of the wage earners, therefore purchasing life insurance is likely the primary financial concern. B is incorrect because the married couple may have other funds to access for an emergency fund. It's also a smaller financial risk than premature death of a primary wage earner. C is incorrect because it's likely they already have some sort of retirement savings plan in place, through their employers. D is incorrect because we do not know if the married couple has intention of paying for the child's education. In addition, if there is a premature death of a primary wage earner, funding a college education may become significantly more difficult without a life insurance policy in place.

In engagements where financial planning services are to be provided, which of the following is not required to be provided to a client? Disclosure of reasonable and customary fees paid for custodial services. 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. How the client pays for products, services and additional incurred costs including surrender charges and sales loads. 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.

Solution: The correct answer is A. The answer is 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.

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? 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. Mary should use the assumptions that result in the most conservative recommendations for retirement funding. The CFP Board's Standards of Professional Conduct require Mary to disengage from the client. Mary should provide her client with multiple projections, consistent with all varying assumptions.

Solution: The correct answer is 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.

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

Solution: The correct answer is A. 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.

Kim and Mark make $65,000 per year combined gross income. Their housing costs are $1,625 per month, while another $300 covers the balance of any other debt they currently owe. Other household expenses bring their total expenses to $3,200 per month. The total portion of their obligations that are monthly interest payments (included in the mortgage and other debt amounts) is $1,000. Their take home averages $3,500 per month. Over the last several years, they have managed to save 3% to 5% of their income. They have set aside $22,400 in money market funds. Select "A" if their total debt can be considered a strength. Select "B" if their total debt can be considered a weakness. Their total debt can be considered a strength. Their total debt can be considered a weakness.

Solution: The correct answer is A. Their total amount of obligation is reasonable. Total debt should not exceed 36% of gross income of the client. Total debt is $1,625 + $300 = $1,925. Total $1,925 / (65,000/12) = 35.5%. As their total debt is less than 36%, it is considered a strength.

If a prospective client implies that they are unable to reveal certain sources of their income to you as you begin undertaking the process of building and developing their Statement of Earnings, what should you do? Terminate the interview immediately and do not engage them as a client. Continue the questioning and assume that they will answer your questions later when they are more comfortable with you and know you better. Estimate from previous information and assign any additional income to previously identified sources. Call the authorities and report your suspicions of possible illegal activities such as money laundering or drug dealing.

Solution: The correct answer is A. This would not be a favorable client. Anyone who cannot provide you with adequate information to assist them in formulating a plan represents an unacceptable risk

Doug, a CFP® professional, has enjoyed a 10-year relationship with Stephen and Danielle, a married couple. Doug is compensated exclusively from hourly financial planning fees. Both Stephen and Danielle are Doug's clients. Danielle calls Doug and shares that she is planning on leaving Stephen and filing for divorce within the next week. Danielle asks Doug to prepare a balance sheet and develop recommendations to help protect Danielle's assets from creditor claims. Stephen is unaware of Danielle's divorce plans. Which of the following describes Doug's best course of action? A. Withdraw from the engagement. B. Call Stephen and ask for his authorization to work on a separation plan. C. Offer to act as mediator between Stephen and Danielle. D. Move forward creating recommendations for Danielle.

Solution: The correct answer is A. Under the Standards of Professional Conduct, Doug is obligated to act in the best interests of his clients. Since Doug is practicing financial planning, he is also obligated to carry a fiduciary duty to both Stephen and Danielle. Moving forward with recommendations for Danielle would breach his fiduciary duty to Stephen. Doug is not a counselor or mediator, and would be over-stepping the financial planning relationship by acting as such.

A client is involved in a potentially litigious matter and asks to confide legally sensitive information to a CFP® professional under the protection of advisor-client privilege. This information may affect another one of the CFP® professional's clients, who happens to be a business partner of the first client. How should the CFP® professional respond to this situation (CFP® Certification Examination, released 8/2012)?

Solution: The correct answer is B. A CFP® Professional's duties to clients, confidentiality and privacy (rule 9) provides examples of when a CFP® may be compelled to share information without the active consent of the client including a civil, criminal, exam, subpoena or summons. The CFP® may be pulled into a civil disclosure and should share as much at the onset of a relationship. A is incorrect because a CFP® professional will be required to disclose information that may impact another client or disengage the client. C is incorrect because debriefing the second client would not be in the best interest of the first client. D is incorrect because there is no such rule as Reciprocal Disclosure.

A client provides a current personal balance sheet to the financial planner during the initial data gathering phase of the financial planning process. This financial statement will enable the financial planner to gain an understanding of all of the following EXCEPT the: Diversification of the client's assets. Size of the client's net cash flow. Client's liquidity position. Client's use of debt.

Solution: The correct answer is B. Assets and liabilities show up on a balance sheet, while cash flows are demonstrated on a statement of earnings also known as a personal cash flow statement (statement of income and expenses).

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.

Solution: The correct answer is B. Section 529 plan assets owned by a grandparent are not included in a FAFSA calculation - only the distribution would be considered. Waiting to distribute the assets would allow them to grow and not jeopardize financial aid in Molly's first years at college. A is incorrect. Paying for the first year may jeopardize Molly's student owned assets (by raising the amount) and limit further aid. C is incorrect. The assets would become an asset of the child and would count against Molly's future financial aid. D is incorrect. The assets would become an asset of the parent and would count against Molly's future financial aid.

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? Engaged in conduct which reflects adversely on his integrity and fitness, upon the marks and upon the profession. 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. Entered into a financial planning engagement with Geezer without gathering sufficient information to meet Geezer's needs and objectives. Failed to exercise reasonable and prudent professional judgment because he failed to clearly outline the scope of the engagement with Geezer. Snidely violated all of the above.

Solution: The correct answer is B. A CFP® professional owes a duty of diligence to their clients. "A CFP® professional must provide services in a timely and thorough manner" There is no arbitrary 3 month limit. The following answers are taken from pre-October 2019 rule changes but reflect the outcome of an actual disciplinary case. Answer A: The Commission found that Respondent engaged in conduct which reflects adversely on his integrity and fitness, upon the marks and upon the profession because he billed the Client's Father in a manner that mischaracterized the actual costs charged to the Client and the Client's Father. Answer C: The Commission found that there was no evidence to conclude that Respondent secured any information that the client's needs and objectives were met. As a result, the Commission found that Respondent entered into a financial planning engagement with the Client's Father without gathering sufficient information to meet the Client's Father's needs and objectives. Answer D: The Commission found that Respondent failed to exercise reasonable and prudent professional judgment because he: 1) failed to clearly outline the scope of the engagement with the Client's Father; and 2) failed to clearly identify who his client was. An updated rationale would find the CFP® professional commingled funds - which is prohibited under duties owed to a client (15). The CFP® professional failed to act as a fiduciary (1 a. b. and c.) The CFP® professional violated practice standards on gathering qualitative and quantitative information and the CFP® professional acted recklessly without integrity.

Your Client, Helen, owns a joint account with her sister. The account was established and contributed to by their mother years ago. Helen comes into the CFP® Professional's office requesting to withdraw her half of the money from the account. The professional feels that she is making an emotional decision at the time, what should he do? Contact the mother and advise her to schedule a meeting with both of her daughters. Talk to Helen and ask her why she does not want to keep her money with her sister anymore. Tell Helen to contact her attorney. Tell Helen to contact her sister and have her sign a document saying that she can withdraw the money.

Solution: The correct answer is B. A discussion with Helen is the best approach. If there are no withdrawal restrictions on the account, contacting another party is not appropriate. A is incorrect because it would be a violation of the Duty of Confidentiality to contact the mother Helen's request. C is incorrect because Helen does not need authorization from the attorney to make the withdrawal. D is incorrect because Helen does not require authorization from her sister to withdraw the money.

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? 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. Walter should disclose the FINRA arbitration to the CFP Board. 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. CFP Board Practice Standards require Walter is to disclose any and all arbitration, civil or criminal suits.

Solution: The correct answer is 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.

John, a CFP® professional, raises his compensation charged for assets under management by 50 basis points, does John have to inform his clients? Yes, he must disclose the change in compensation with 10 days. Yes, he must timely disclose the change in compensation. Yes, he must immediately disclose the change in compensation. Yes, he must disclose the change in compensation within 45 days.

Solution: The correct answer is B. According to the CFP Board Code and Standards, the certificant shall timely disclose to the client any material changes to compensation. A is incorrect because there is not a 10 day requirement. C is incorrect because "immediately" is not required, not defined in the code of ethics. D is incorrect because there is not a 45 day requirement.

A CFP® professional was asked by a client to appropriately address the following questions. How large of a deductible should be on the umbrella policy covering my home? How much do I need to save so my spouse and I will have a secure retirement? What is the S&P500 and why is it down by 2% today? What is the financial strength of XYZ insurance company? Which of these questions considered individually would likely be considered the practice of financial planning under the Code of Ethics? Question 1 Question 2 Question 3 Question 4

Solution: The correct answer is B. According to the Financial Planning and the Application of Practice Standards for The Financial Planning Process, Financial Planning is 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. The remaining questions are factual and can be answered without any integration of client information or facts.

In which of the following situations is a CFP® professional not permitted by the CFP Board to use or disclose information related to a client or the client's affairs? Within the CFP® professionals firm or to other persons with whom the CFP® professional is providing services with to clients. To the compliance officer of a broker/dealer where the client's accounts were held in the past. As necessary to support or defend a civil claim made by a client As necessary to provide information between attorneys, accountants and auditors.

Solution: The correct answer is B. All other situations are authorized by duties owed to clients (9( Confidentiality and Privacy. The compliance officer where an account was held in the past does not have the authority to compel a CFP® professional to provide confidential information.

Which of the following is/are true regarding registering as an investment adviser? Exceptions are not governed by the Investment Advisers Act of 1940 at all. Exemptions are governed by Section 206 of the Investment Advisers Act of 1940. Exceptions include advisers whose only clients are insurance companies. Exemptions include banks and bank holding companies. I only. I and II only. II and III only. II and IV only.

Solution: The correct answer is B. Exceptions are not governed by the Act. Exemptions need not register, but are governed by the "anti-fraud" provision (Section 206) of the Act.

A client is recommended to a CFP® professional. The client is middle aged with 2 grown children, and mentions to the professional that he lives an "alternative lifestyle." The professional does not know what this means. What should he do? Just ignore it since he can tell that the client is embarrassed. He should ask the client what he means by "alternative lifestyle." He should ask the client's children. He should ask his colleague, who sent him the referral.

Solution: The correct answer is B. In order to provide the client with the most appropriate recommendations, the CFP® professional needs to know what the client means by "alternative lifestyle" and the best person to answer that question in the actual client. A is incorrect because in order to provide the duty of care of a fiduciary and the best interest of the client, the professional needs to know what the client means by "alternative lifestyle". C is incorrect because the CFP® professional is bound by the duty of confidentiality. D is incorrect because the best source of what the client means, is the actual client.

John, age 58, has been using a CFP® practitioner for the last 15 years. The CFP® practitioner recently retired and, as a result, John has decided to engage Tom, who is also a CFP® practitioner, but unaffiliated with John's original practitioner. After analyzing and evaluating John's current financial position, Tom made his recommendations. Those recommendations differed from that of John's original practitioner. According to Tom's Duty to John, how should differences in recommendations be handled? The Code of Ethics requires a CFP® practitioner to act in a professional manner and recommendations should not conflict with other CFP® practitioners. Significant differences in recommendations between planners are acceptable, as long as the recommendations reasonably meet the client's goals, needs and priorities. The Code of Ethics require Tom to contact John's prior practitioner to reconciled differences in their recommendations. Tom must exercise professionalism, limit the scope of the engagement to recommendations that are consistent with the John's previous practitioner.

Solution: The correct answer is B. Practice Standards 4(b) do not require uniform recommendations between advisers. The basis for making the recommendation, including how the recommendation is designed to maximize the potential to meet the Client's goals, the anticipated material effects of the recommendation on the Client's financial and personal circumstances, and how the recommendation integrates relevant elements of the Client's personal and financial circumstances.

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

Solution: The correct answer is 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.

You receive a phone call from an individual you have NOT spoken with previously. The caller is excited, just having heard that a new mutual fund is positioned to deliver large gains in the coming year. The caller wishes to purchase shares of the fund through you. According to the Code of Ethics and standards of practice, which of the following would be acceptable actions for a CFP® professional? Gather sufficient information about the client to establish a brokerage account and execute the transaction after the client signs a letter acknowledging the limited nature of the engagement. Understanding The Client's Personal and Financial Circumstances as well as Identifying and Selecting Goals before analyzing and making recommendations. Gather sufficient information about the client to establish a brokerage account and execute the transaction only after providing written information about your compensation, potential conflicts of interest, contact information and any other material information about you and your firm. Inform the potential client that although you are willing to execute the transaction, you are certain you could improve their risk portfolio and overall financial plan if they would engage you to undertake a comprehensive financial planning review.

Solution: The correct answer is B. Selling a financial asset requires a CFP® professional to act with a duty of care and loyalty. Selling the shares will require an analysis of risk and financial goals, likely creating a situation where the CFP® professional is required to follow practice standards. The first practice standard is to understand client circumstances and selecting financial goals.

Six months ago, Joel Madison purchased new dining room and living room furniture for $8,000. For purposes of preparing an accurate financial statement, how would this purchase appear? Use asset on the client's net worth statement. Investment asset on the client's net worth statement. Variable outflow on the client's historic cash flow statement. Fixed outflow on the client's cash flow statement. I, II and III only. I and III only. II and IV only. IV only.

Solution: The correct answer is B. The client's home is an asset; its contents in this case the furniture, will be used regularly. Therefore, it is a "use asset." Since Joel won't be buying furniture on a regular and reoccurring basis, it is a variable expense.

A CFP® professional meets with two new clients who would like advice about their mortgage. In the review, the CFP® professional finds that their essential expenses exceed their income. Mortgage rates have come down significantly and they intend to refinance their current 30-year mortgage to a 15-year mortgage. Their payments will be higher than their current payment. However, they will pay off the mortgage 5 years earlier than the current amortization schedule allows. What should the CFP® professional do (CFP® Certification Examination, released 8/2012)? Suggest they stay with their current mortgage, as the higher interest is tax deductible. Suggest they refinance to a 30-year fixed mortgage and begin funding savings. Suggest they refinance to the 15-year mortgage, which would reduce the amount of interest paid over the life of the loan. Suggest they meet with their mortgage broker.

Solution: The correct answer is B. The clients have a negative cash flow, and should reduce their payments as much as possible and establish a cash reserve. A is incorrect because they need to reduce their expenses below their current income. C is incorrect because a 15-year mortgage will increases their cash outflows, which already exceed their current income. D is incorrect because meeting with their mortgage broker may or may not result in a lower mortgage payment, thereby lowering their overall expenses.

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? Turn down the engagement Disclose to the Client the use of a third party and prepare the plan, with the help of his colleague as a resource Explain to the business owner that it's outside the scope of his expertise Do the necessary research and figures out how to prepare a succession plan

Solution: The correct answer is 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 most 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.

When should a financial planning client immediately contact their CFP® Professional? When the client has an additional child. If there is a change in the client's marital status. If there is a change in the client's tax rate. If there is a change in the client's employer.

Solution: The correct answer is B. This is a difficult question to choose one correct answer. The best answer is B, as a change in marital status likely results in a major impact to current and future financial planning. The engagement will need to be updated to reflect who the client is (additional client if married or removal of a client in the case of divorce) A is incorrect because while the client should contact their CFP® professional regarding a new child, the additional child will not change the scope of the engagement. C is incorrect because a change in tax rates is likely expected, unless it's related to a significant change in income. D is incorrect because simply changing jobs is immaterial, unless it accompanies a significant change in insurance benefits and/or income.

A local businessperson approaches a CFP® practitioner for assistance with an investment-related tax problem. The client's previous tax preparer had suggested the purchase of a variety of tax-advantaged investments to reduce the client's current and future tax burden. Time passed, the client's income dropped, and the tax laws changed. The client does NOT feel the tax preparer misrepresented the situation on the initial sale, but would still like to know what recourse is available with respect to the tax preparer. The CFP® practitioner should: Explain to the client that this issue is beyond the scope of the CFP® practitioner's professional expertise. Advise the client that NO recourse is available. Advise the client to contact an attorney. Contact the tax preparer. IV only. I and III only. II and IV only. I, II and III only.

Solution: The correct answer is B. This problem does not deal with another CFP® practitioner, thus the CFP® practitioner must advise that this situation goes beyond the scope of the CFP Board. Though there may be recourse, it is not within the CFP® practitioner domain to advise such or contact the former tax preparer. The client may wish to contact an attorney for further advice.

Six months ago, a client purchased a new bedroom suite for $6,500. For purposes of preparing accurate financial statements, this purchase would appear as a (an): (CFP® Certification Examination released 3/95) Personal use asset on the client's net worth statement. Investment asset on the client's net worth statement. Variable outflow on a client's historic cash flow statement. Fixed outflow on the client's cash flow statement. 1, 2 and 3 1 and 3 4 only 2 and 4

Solution: The correct answer is B. Variable outflow because it's not a recurring expense, such as a debt payment.

Which of the following would likely be a violation of the Code of Ethics and Standards of Conduct as it relates to the third Practice Standard (Analyzing the Client's Current Course of Action and Potential Alternative Course(s) of Action)? Developing more than one alternative to meet the client's goals, needs, and priorities. Developing alternatives that differ from those of other practitioners. Not developing any alternatives and, as a result, changing the course of action using trial and error. Not developing any alternatives that warrant a change in the client's current course of actions.

Solution: The correct answer is C. A CFP® professional must consider and analyze one or more potential alternative courses of action, including the material advantages and disadvantages of each alternative, whether each alternative helps maximize the potential for meeting the Client's goals, and how each alternative integrates the relevant elements of the Client's personal and financial circumstances. Trial and error does not meet this standard of care.

Becca applied for CFP® Certification and was denied. Her prior conduct falls under the "presumed" list and she wants to appeal. All of the following are true regarding the review process EXCEPT: She must submit a written petition for reconsideration to Professional Review staff and sign a form agreeing to CFP Board's jurisdiction. A fee will be charged to all candidates submitting a reconsideration request. Staff will review the request to ensure the transgression falls within the "always" bar list. She may appeal this decision to the Appeals Committee of the Board.

Solution: The correct answer is C. All other statements are true. Staff will review the request to ensure the transgression falls within the "presumed" list. The "always" bar list cannot be petitioned unless the revocation of a license is vacated or a felony conviction is overturned.

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? Private censure. Public letter of admonition. Revocation. Temporary suspension of right to use the marks (up to 5 years). The CFP Board has no jurisdiction in this case, as it is a matter for the SEC to determine.

Solution: The correct answer is 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.

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 could qualify for both mortgages, which of the following aspects should be considered in deciding between these two mortgages? Gross income of the couple. Estimated length of ownership. Real estate tax liability. Cash currently available. I and II only. II only. II and IV only. I, II, III and IV.

Solution: The correct answer is C. The question tries to eliminate the need to include gross income as part of the answer by stating that the couple could qualify for both mortgages. Real estate taxes will be the same regardless of their financing.

Bill is a CFP® professional and is working with his clients, Sally and Harry. Bill arranged and attended a meeting between Sally, Harry and Bill's brother, who is an attorney. Bill's brother presented an investment opportunity to Sally and Harry. Sally and Harry decided to invest $250,000 as part of a loan secured by a promissory note. Although the investment was offered by Bill's brother, the clients were led to believe Bill and his firm were involved with the investment. Bill's brother signed the promissory note. As a result, Bill violated the Code of Ethics, and his usage of the marks were suspended for two years. The most appropriate action for Bill to take would have been? Bill should have structured the investment as an equity investment, rather than a loan, because the Code of Ethics forbids borrowing from a client. Bill has an inherent conflict of interest because his brother offered the investment. The Code of Ethics do not permit Bill to have material conflicts of interest. Bill should have disclosed in writing that Bill and his firm were not involved in the investment with minimal industry jargon, clearly representing a material conflict. Bill was obligated to keep his client's information confidential and violated that confidentiality by permitting his brother to offer an investment to the client.

Solution: The correct answer is C. According to Anonymous Case History #15982 by not disclosing in writing to the clients that both the CFP®professional and his firm were not involved in the investment, the planner violated rules regarding disclosure, failing to exercise reasonable and prudent professional judgment and failing to provide services in compliance with laws and regulations. The planner's action runs afoul of the October, 2019 rule update in multiple areas. Duties to clients including violating: Integrity, disclosure of a material conflict of interest, not disclosing and economic benefit of a referral or related party. While the new Code and Standards allow for oral disclosure of material conflicts of interest, it is better to put them in writing the more complicated they are. A is not the best answer, the loan itself was not problematic, the investment and atmosphere around the investment. B is incorrect Bill can have conflicts, he needs to better manage and disclose them. D is incorrect if the client's gave consent to share information with Bill's brother.

Sidney, who is not a CFP® certificant, asks Alison, who is a CFP® certificant and licensed insurance broker, to execute a $1 million term life policy to Sidney's client, Sally. For this specific transaction, what is Alison's standard of care duty as a CFP® professional? Meet her state insurance suitability duty requirements. Follow the prudent investor rule. Act as a fiduciary. Alison should decline to provide the policy since Sally is not her client.

Solution: The correct answer is C. CFP® professionals are required to hold a fiduciary duty when they recommend financial assets (life insurance) or engage in financial planning. Alison will recommend a specific term policy, making her a fiduciary. B is incorrect the prudent investor rule does not apply in this circumstance.

A CFP® certificant is required to operate under the fiduciary standard of care when: The CFP® certificant charges the client an asset management, flat, hourly, or retainer fee for his or her work. An engagement is comprehensive in nature and requires the integration of two or more core financial planning elements. 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. At all times, when providing any kind of advice (financial or otherwise) to a client.

Solution: The correct answer is C. Duties owed to clients 1. 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.

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: Esteban believing he and Ginger have entered into a financial planning relationship. The extent Ginger and Esteban collaborate and integrate qualitative, quantitative data and Esteban's financial goals. Ginger's perception if she and Esteban have entered into a financial planning relationship. A written scope of engagement between Esteban and Ginger describing the relationship as financial planning.

Solution: The correct answer is C. Ginger's perception of the relationship does not have bearing on if she must follow the planning process. CFP Board requires Ginger to follow the practice standards if the engagement is financial planning (choice D), if Esteban believes the process is financial planning (choice A) or if the relationship is integrative and collaborative (choice B)

A young, single client approaches a CFP® professional with $5,000 stating that he would like to develop a financial plan and invest in the market. This is his first experience investing and he would like help choosing an appropriate account. What is the CFP® professional's most appropriate course of action (CFP® Certification Examination, released 8/2012)?

Solution: The correct answer is C. Of the answer options provided, reviewing debt (Answer C) is the best fit. The CFP® professional needs additional information from the client before taking an action involving increasing client risk, such as opening a margin account. Reviewing life insurance may be appropriate for the client, but does not appear to be a goal of the client. The CFP®professional does not have enough information to determine if a Roth IRA is appropriate. A is incorrect because a brokerage account with margin increases the client's risk, which the planner needs to gather more information on the client's ability and willingness to accept more risk. B is incorrect because the planner needs additional information to determine if a Roth IRA is appropriate or not. D is incorrect because the client did not indicate that life insurance is a goal of the client's.

Harold and Mary Anne Miller are a married couple in their early 40s with three children, ages 7, 10, and 12. Harold earns $350,000 per year as General Counsel of a mid-sized IT firm and Mary Anne is a homemaker. They have major assets of $1,500,000 cash and $1,000,000 in stock options. They have done no estate planning. Harold has life insurance of two times his salary from his employer. Harold plans on working full-time until age 62. Harold has the potential to receive more options and restricted stock based on his company's performance, but has requested that this not be included in his assets for now given the uncertainty. College planning is of great concern to the Millers, currently they have no plan in place. They estimate that they will need $150,000 for each child in current dollars to fund their education. The Millers have constructed a budget and have determined that their household expenses are currently $12,000 per month, after tax. Assume that the Millers are in the 35% federal tax bracket and 6% state tax bracket. The Millers would like to set aside money to cover all of the required funding for their children's education. They are not confident the children will be able to handle money by age 21. Which of the following is most appropriate for the Millers (CFP® Certification Examination, released 8/2012)? Uniform Transfers to Minors Act (UTMA) account in the name of each child Coverdell Education Savings Account Section 529 Qualified College Savings plan Section 529 Prepaid Tuition plan

Solution: The correct answer is C. Section 529 plans allow for the family to save for all qualified costs, not just tuition. A is incorrect because the UTMA account causes loss of control at the age of majority. B is incorrect because the Coverdell ESA (formally Education IRA) would not be able to fully fund education given contribution limits. D is incorrect because the Prepaid Tuition plan only covers tuition.

Which of the following statements are true regarding Form ADV and the disclosure requirements for a financial planning engagement? I. An investment advisor may be able to use their Form ADV Part II to meet the CFP Board disclosure requirements. II. An investment advisor may provide the client Form ADV Part II prior to contracting with the client. III. An investment advisor must disclose compensation calculations and services provided to their clients. IV. Once Form ADV is approved by the SEC, an investment advisor can describe their disclosure as approved by the SEC and distribute to clients that the disclosure was approved by the SEC. I only. I and II. I, II and III I, II, III and IV

Solution: The correct answer is C. Statements I, II and III are correct. Statement IV is incorrect because the SEC approves the applicant as an investment advisor, without regard to any literature that may be used to satisfy the disclosure requirement.

A client, Tom, informs a CFP® professional that his daughter, Susie, graduated from college last month and landed her first job. Tom wants to establish a Roth IRA for Susie. Tom wants to make a $5,000 contribution for Susie and explains that she does not know about investing and probably would not have the extra money to contribute. How could the CFP® professional best accomplish Tom's objective (CFP® Certification Examination, released 8/2012)? Open the account in Susie's name and then have Tom gift the assets to Susie. Explain to Tom that he can contribute to an IRA for Susie. Request Tom set up a joint meeting with Susie to complete the planning process with her. Explain to Tom that Susie must complete a risk questionnaire before Tom can open the account.

Solution: The correct answer is C. Susie will be the client and account owner and will need to be involved in this process. A is incorrect because the planner must meet with Susie to open an account for her. B is incorrect Susie must use earned income to make a contribution to a Roth or Traditional IRA. D is incorrect because Tom must meet with Susie before opening the Roth IRA and include her in the process.

You receive a phone call from an individual you have NOT spoken with previously. The caller is excited, just having heard that a new mutual fund is positioned to deliver large gains in the coming year. The caller wishes to purchase shares of the fund through you. Keeping in mind stages of the overall personal financial planning process, which of the following questions that address the financial planning process and standards of practice should you ask the caller? What are your goals for this investment? What other investments do you have? What is your date of birth? Do you want your dividends reinvested? I and III only. II and IV only. I, II and III only. I, II and IV only.

Solution: The correct answer is C. The financial planning professional is required to Understanding The Client's Personal and Financial Circumstances as well as Identifying and Selecting Goals before analyzing and making recommendations. I, II and III reflect meaningful information about establishing facts and the intent of the client.

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? 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. Sean violated the Duty of Confidentially and privacy owed to Alice's clients. Sean violated Duties owed to his firm (2) by not Complying with Lawful Objectives of CFP® Professional's Firm Big Money Advisory Firm violated the Duty of Confidentially and privacy owed to Alice's clients.

Solution: The correct answer is C. The following answers are taken from pre-October 2019 rule changes but reflect the outcome of an actual disciplinary case. 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. After October, 2019 rule changes the outcome of the case would likely have been similar for the CFP® professional. Sean is required to comply with lawful objectives and following the policies and procedures of his firm (Duties owed to Firms and Subordinates 2. b.)

Julie White, a CFP® professional, has proof that Susan Porter, another CFP® professional in her office, has utilized client's funds under management to cover gambling debts. Susan returned the funds to the client's accounts and made them whole, including the earnings that would have accrued during the time the funds were withdrawn. Under the Code of Ethics and Professional Responsibility and Disciplinary Rules and Procedures, Julie is obligated to: Report Susan's actions to the local Financial Planning Association Chapter for proper processing. Report Susan's actions to the CFP Board because Susan has violated her duty of confidentiality to the client. Report Susan's actions to the CFP Board because Susan has violated her fiduciary duty to the client. NOT report Susan's actions to the CFP Board because Julie would violate the Confidentiality Principle.

Solution: The correct answer is C. While a CFP® professional is not required to initiate a complaint against another CFP® professional, they are able to, and such a report may help the integrity of the designation. Misusing funds is a violation of fiduciary duty. A CFP® professional may not make false or misleading representations to the CFP Board or obstruct CFP Board in the performance of its duties. A CFP® professional must satisfy the "cooperation requirements" set forth in the CFP Board's Procedural Rules, including cooperating fully with CFP Board's requests, investigations, disciplinary proceedings, and disciplinary decisions.

When must conflicts of interest be disclosed by a CFP®professional? Upon presentation of financial planning recommendations Upon selecting products and services to implement a financial plan During the client data-gathering process Before providing services and as material conflicts occur

Solution: The correct answer is D.

Morgan, a prospective client, recently approached Mike, a CFP® professional with significant estate planning needs. Mike does not feel like he can adequately fulfill all of Morgan's needs so he refers Morgan to a colleague who specializes in estate planning. What principle did Mike most clearly demonstrate? Objectivity Fairness Professionalism Competence

Solution: The correct answer is D. A competent financial planner focuses on maintaining and applying adequate skills and knowledge when providing services to clients. Competence also includes the planner's ability to recognize his or her limitations. Answer A is incorrect because objectivity is about providing professional services objectively and Mike did not perform any services. Answer B is incorrect because although Mike is being fair to Morgan, he is better demonstrating competence, and the question asks what principle did Mike MOST clearly demonstrate. Answer C is incorrect because much like answer B, competence is most clearly demonstrated over professionalism.

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.

Solution: The correct answer is 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.

Robert Smith asks for your help in preparing his cash flow statement. He tells you that his salary before taxes is $250,000 and that he has NO mortgage on his home. Which of the following statements is true about Robert's cash flow statement? The value of the home would be an income source, since there is NO mortgage. The value of the home would be an asset. The taxes on his salary would be a liability. The taxes on his salary would be an expense.

Solution: The correct answer is D. Option "A" - Home equity would not provide a source of income. Option "B" - The value of the home is an asset, but this has nothing to do with cash flow statements. Option "C" - Taxes on his salary are an expense. Liabilities are shown on the state of financial position, not the cash flow statement.

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: Establish an emergency funds with stock mutual funds. Start a college savings fund for their children. Purchase disability insurance for the wife and the husband. Prepare wills for the wife and the husband. Secure credit life insurance for the auto loan. V only. I and II only. I and III only. III and IV only.

Solution: The correct answer is D. 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. The wife has insurance already; therefore, this is not a priority yet.

Becca, age 24, applied for CFP® Certification. The Disciplinary and Ethics Commission denied her application because she had been convicted of assault and battery and served nine months 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: She must submit a written petition for consideration to Professional Review staff and sign a form agreeing to CFP Board's jurisdiction. Staff will review the request to ensure the transgression falls within the "presumed unacceptable" list. Her prior conduct falls under the "presumed unacceptable" category and therefore, she may appeal the denial of certification. The Disciplinary and Ethics Commission's decision regarding a petition for consideration is final.

Solution: The correct answer is D. Reason: The DEC's decision regarding a petition for consideration may be appealed to the Appeals Committee of the Board of Directors, in accordance with Article 11 of the Disciplinary Rules and Procedures. All the other statements are true.

Robert, a CFP® professional, performed a needs analysis concerning Jack's life insurance situation last year and sold him a universal life policy under a limited scope engagement. This year, Jack wants Robert to evaluate his investment allocation, risk tolerance and recommend some mutual funds. All of the following information is required to be provided to Jack according to the Code of Ethics and Standards of Conduct EXCEPT? Terms of the engagement including the scope of the engagement with any limitations, the period services will be provided and responsibilities of the Client. Disclosure of Economic Benefit for Referral or Engagement of Additional Persons. How the CFP® professional and their firm are compensated for providing products and services. A written agreement covering the specific obligations and responsibilities of each party.

Solution: The correct answer is D. Robert's obligations of disclosure to Jack require (Obligations to clients 10) disclosing answers B and C. As the engagement will require a discussion of client goals and working to meet those goals this is a financial planning engagement. As such any limitations, end date and a scope of engagement must be provided.

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.

Solution: The correct answer is 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.

Salina, a CFP® professional, agreed to prepare a financial plan for Rodriquez, who was 85 years old at the time. Salina did not prepare the financial plan. Salina requested and received from Rodriquez a $1,000 loan. Salina recommended that Rodriquez invest $75,000 in a viatical settlement agreement investment. The amount comprised approximately two-thirds of Rodriquez's life savings and was estimated to lead to a profit in five years. Rodriquez filed a grievance with the CFP Board. According to the securities regulator in the state where Salina provided services ("State"), only a licensed broker-dealer is authorized to sell viaticals in the State. Salina was not licensed as a broker or dealer in the State. Salina did not respond in a timely manner to the following communications by CFP Board: 1) a Notice of Investigation; 2) a Second Request Letter; 3) a telephone call; 4) an Order to Show Cause; and 5) CFP Board's Complaint. In a telephone conversation with CFP Board, Rodriquez informed CFP Board that Salina was aware of CFP Board's investigation and had asked him to withdraw his grievance. According to the CFP Board's disciplinary procedures, which of the following is the most likely result of Salina's conduct? The Board would not likely take action unless a conviction on a State securities regulation occurred. A Public Censure until such time as there was a conviction on a State securities regulation. A suspension of at least one year based upon Salina's recommendation of an unregistered investment product to the 85-year-old Client that involved two-thirds of the Client's life savings and a five-year period of maturity. A revocation of Salina's right to use the CFP® marks since she failed to respond to the Board's inquiries.

Solution: The correct answer is D. The following answers are taken from pre-October 2019 rule changes but reflect the outcome of an actual disciplinary case. The Commission deemed that the above facts and violations be admitted because Respondent did not file an Answer to the Complaint. The Commission issued an Order of Revocation pursuant to Article 7.4 of the Disciplinary Rules, revoking Respondent's right to use the CFP® marks, CERTIFIED FINANCIAL PLANNER™ and certification marks. A is false since the Board may act upon violations of the Code of Ethics whether or not a legal conviction has occurred. B is false because failure to respond to the Board's inquiries regarding serious violations of the Code results in revocation. C might have been a valid answer had Salina responded to the Board's inquiries. After October, 2019 rule changes the outcome of the case would likely have been similar for the CFP® professional. Salina did not act as a fiduciary, required when selling a financial asset. Salina did not act with integrity, competence, manage conflicts of interest or comply with the law.

The Sampsons, Dave, age 52 and Debbi, age 49, have been married for 13 years. Debbi approached George, a CFP®professional who has done extensive financial planning for the couple for the past five years. She confides to George that her marriage is in trouble and she plans on filing for legal separation from Dave. She needs $7,000 for the attorney fees. The Sampson's assets include: · Joint brokerage account - $640,000 in mutual funds and cash · Debbi's 401(k) plan - $120,000 · Dave's traditional IRA - $185,000 · Life insurance on Dave's life, owned by Dave - $500,000 death benefit, $32,000 cash value Which of the following actions would be the most appropriate for George to recommend to Debbi? A. Withdraw $7,000 from the brokerage account without obtaining consent from Dave. B. Withdraw $7,000 from the brokerage account after obtaining consent from Dave. C. Borrow $7,000 from the life insurance policy. D. None of the above.

Solution: The correct answer is D. A is incorrect. While it is not necessary to obtain Dave's approval, since the account is owned jointly, you are violating your fiduciary duty to Dave by making this transaction for Debbi. Both are your clients. You cannot make a transaction on behalf of one client that will knowingly cause harm to another client. Standards A. 1, A. 2, A.5, B is incorrect. Consent is not needed on the joint account, the issue is a violation of your fiduciary duty to Dave. C is incorrect. Debbi is not the owner of the life insurance policy, and therefore she would not be able to access the cash value without obtaining authorization from Dave.

Sally, age 28, is a CFP® professional and is just starting her own financial planning practice. Sally is concerned about the liability associated with practicing financial planning and would like to take the appropriate steps to minimize her liability. Which action should Sally take that would help her to minimize her liability? Sally should use a suitability standard when evaluating and recommending investment alternatives, and other financial planning advice, for clients. Sally should partner with other CFP® professionals and offer financial planning services as part of a team of practitioners to minimize her liability. Sally should purchase a general liability insurance policy and an errors and omissions policy. Sally should provide services with the duty of a fiduciary.

Solution: The correct answer is D. According to the CFP Board's Standard of Professional Conduct FAQs, the CFP Board believes that compliance with the Standards, including the requirement that financial planning services be provided with the duty of a fiduciary, is a way to reduce liability. A is incorrect Sally must provide professional services with a Fiduciary Duty (Duties owed to clients 1 a. b. and c.) B and C are strong choices, but practicing with a duty of care, loyalty and following client instructions should lead to fewer infractions and liability than other business models

Bob Blazek comes to you, his financial planner and a CFP® certificant, with a question about a recent agreement he made. His brother Bill asked to borrow $10,000 to start a new business. What advice do you give Bob to help make this a successful transaction? Make a formal arrangement specifying the interest rate and repayment schedule. State in writing that this is a loan, NOT a gift, and have Bill sign the document. Explain to Bob his options in case of default. Make sure Bob approves of the business venture prior to making the loan. I and IV only. II and III only. II and IV only. I, II and III only.

Solution: The correct answer is D. All choices are good advice, except for Option "IV." If Bob does not approve of the business venture, he need not loan Bill the money. Based on the facts, he has already decided to loan the money by coming to you for information on how to accomplish it.

Which of the following terms best describes assets such as savings accounts, stocks, bonds, mutual funds? Tangible assets. Liquid assets. Use assets. Financial assets.

Solution: The correct answer is D. All of the above are financial assets, also known as intangible assets. Tangible assets could be your furniture, liquid assets are made up of cash, but not stocks, bonds and mutual funds, and use assets could be your car or home.

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 written disclosure of all material conflicts of interest Robert faces prior to entering into a financial planning agreement. A notarized statement from Robert's compliance officer that Robert is free and clear of all material conflicts of interest. A form ADV showing that Robert is charging hourly fees, the only accepted compensation model allowed in a financial planning relationship. None of the above is required by the Code of Ethics.

Solution: The correct answer is D. CFP Board requires material conflicts of interest to be disclosed. They can be delivered either orally or in writing, and are not require to be provided in writing. B and C are not required of a CFP® professional.

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

Solution: The correct answer is 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.

In analyzing the financial statements of a client's business, you notice the collection period for accounts receivable has been increasing. What does this increase suggest about the firm's credit policy? The firm's current ratio is also increasing. The collection period has NO relationship to a firm's credit policy. The firm is losing qualified customers. The credit policy is too lenient.

Solution: The correct answer is D. Longer periods of time for collection of receivables indicates less money collected, and less to use by your client's firm.

Monthly housing costs including principle, interest, insurance, and taxes should not exceed: 36% of the client's gross monthly income. 20% of the client's net monthly income. 20% of the client's gross monthly income. 28% of the client's gross monthly income.

Solution: The correct answer is D. Monthly housing costs including principle, interest, insurance, and taxes should not exceed 28% of the client's gross monthly income.

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.

Solution: The correct answer is 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.

Martina Flower, CFP® is dually registered under the Investment Advisers Act of 1940. For which one of the following activities would this planner be in violation of the act? She received, with the client's knowledge, both a fee for advice given to the client and a commission from the client transactions. She included the cost of preparing the client's income tax returns as part of the annual fee charged the client. She gave clients planning advice that was NOT achievable, given the current economic conditions. She distributed to clients the written disclosure brochure two weeks after an investment advising contract was duly signed.

Solution: The correct answer is D. This question is challenging because of option "C." However, future planning (holistic and lifecycle planning) is acceptable. It does not imply that her projections were inappropriate. Option "D" is correct because the disclosure brochure must be given to clients at or before the time an advisory engagement is entered into.

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. Snidely offered to review and make recommendations on Geezer's then-current living trust. Snidely prepared a Last Will, Revocable Trust and Durable Power of Attorney for management of Property and Personal Affairs, and charged Geezer $400 per hour for preparing the documents. Geezer had not requested such documents. Geezer asked Snidely to provide him with all the documents pertaining to his investments. As of 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 which of his duties to Geezer? Commingled client funds with his own funds when he deposited Geezer's funds into the Company's account. Failed to act with a duty of care and loyalty by potentially over-billing and creating excessive estate planning documents. Failed to gather sufficient information to learn about Geezer's goals, objectives and priorities. Failed to act with integrity and failed to comply with the law. Snidely violated all of the above provisions.

Solution: The correct answer is E. (Anonymous Case History 19075) Answer A: The Commission found that Respondent commingled client funds with his own funds when he deposited the Client's Father's funds into the Company's account, which Respondent controlled and used as the Company's checking account. Answer B: The Commission found that Respondent failed to act in the interest of the client by: 1) creating unnecessary estate planning documents; 2) disrupting the Client's Father's cash flow; and 3) not investing the Client's Father's funds. Answer C: The Commission found that there was no evidence to conclude that Respondent secured any information that the client's needs and objectives were met. As a result, the Commission found that Respondent entered into a financial planning engagement with the Client's Father without gathering sufficient information to meet the Client's Father's needs and objectives. Answer D: The Commission found that Respondent failed to exercise reasonable and prudent professional judgment because he: 1) failed to clearly outline the scope of the engagement with the Client's Father; 2) failed to clearly identify who his client was; and 3) failed to establish an adequate billing system. An updated rationale would find the CFP® professional commingled funds - which is prohibited under duties owed to a client (15). The CFP® professional failed to act as a fiduciary (1 a. b. and c.) The CFP® professional violated practice standards on gathering qualitative and quantitative information and the CFP® professional acted recklessly without integrity. A, B, C and D would be violated by today's interpretation of the rules.

Net Savings Ratio

Total Income - Total Expenditures = Net Savings; Net savings / Total Income = Savings Ratio

Net (After Tax) Yield

[(1+After Tax Return)/(1+Inflation)-1]x100