Clarence is a CFP professional whose clients include several farmers in his community. His new client, Buddy, a local farmer, tells Clarence during their first meeting that he is interested in selling his farm and would like to provide financing to a qualified buyer. David, who is also Clarence's client, has expressed an interest in purchasing the farm for $900,000. Buddy feels he could sell his farm at a higher price but, in the event he did not in 60 days, he would consider David's offer. He would like Clarence to advise him of the best way to owner-finance the sale. Based on your analysis of this information, which of the following steps should Clarence take first in his relationship with Buddy?

A) Inform his other clients that Buddy's business is for sale and might be available at a bargain price

B)Identify and resolve any potential conflicts of interest that may arise in his relationship with Buddy

C)Consider alternatives that might meet Buddy's goals

D)Gather detailed financial information related to Buddy's farm

Analyze the following scenarios involving Melissa and Claudio, both CFP professionals. Which individualwould be considered to be providing financial advice?

1. Melissa offers specific recommendations to Jeremy, her client, about the impact of the current market conditions on his investment portfolio and provides a customized list of actions toward achieving financial wellness.
2. Claudio provides a quarterly newsletter to all individuals on his firm's marketing list with general market observations and a list of steps toward financial wellness. He also holds semiannual seminars providing general financial information to prospective clients.

A)Neither I nor II

B)I only

C)II only

D)Both I and II

The preamble of CFP Board's Code of Ethics and Standards of Conduct describes the value of upholding aspirational standards and incorporating them into everyday financial planning practice. Identify the purpose(s) of the Code and Standards contained in the preamble.

1. To hold all CFP professionals to high standards of competency and ethics
2. To benefit and protect the public
3. To investigate, review, consider recommendations, and issue final decisions on allegations of violations and/or noncompliance
4. To advance financial planning as a distinct and valuable profession

A)I, II, and IV

B)III only

C)I only

D)I and II

Emma, a CFP professional, has a thriving financial planning practice in a small town. As part of clients' financial planning engagements with Emma, these clients have provided her with a considerable amount of confidential information. Under which of the following circumstances can Emma reveal confidential client information?

1. To defend herself against charges of wrongdoing
2. To give an example in a meeting with another client
3. To demonstrate to prospective clients the types of services Emma provides
4. To provide information to an estate planning attorney who is working on a similar case

A)I only

B)I, III, and IV

C)III and IV

D)I and II

Ross and Jackie recently retired and are planning an Asian vacation to celebrate their 45th wedding anniversary. When they return, they would like to meet with you, their financial planner, to discuss charitable contributions they would like to make. Ross and Jackie are currently in which life cycle phase?

A)Conservation phase

B)Distribution phase

C)Asset accumulation phase

D)Protection phase

Stephanie, a CFP professional, is working with a graphic artist to design a new brochure advertising her services. On the cover, under her name, she advertises herself as a CFP consultant. Inside the brochure, under her name, she identifies herself as a CERTIFIED FINANCIAL PLANNER. According to CFP Board's guidelines regarding how the CFP marks may be used, which of the following is CORRECT?

1. Advertising herself as a CFP consultant is prohibited by CFP Board.
2. Following her name, Stephanie could have identified herself as a CFP.
3. Stephanie has correctly identified herself as a CERTIFIED FINANCIAL PLANNER.

A)I and III

B)I only

C)II and III

D)I, II, and III

CFP Board provides guidelines regarding how the CFP marks may be used in documents or marketing materials. Identify the items that are required when the words CERTIFIED FINANCIAL PLANNER are used.

1. Always use the symbol.
2. Always associate with CFP Board.
3. Always use capital letters or small-cap font.
4. Always use with one of CFP Board's approved nouns (certificant, professional, practitioner, certification, mark, exam) unless directly following the name of the individual certified by CFP Board.

A)II and IV

B)I, III, and IV

C)II and III

D)I and III

Zoe, a CFP professional, has recently entered into a financial planning engagement with Mannie. As his financial planner, which of the following are Zoe's roles?

1. Analyzing Mannie's current financial status
2. Assisting Mannie in implementing the financial plan
3. Helping Mannie identify financial goals and objectives
4. Providing the financial statements needed tocomplete the financial plan

A)

I and III

B)

I, II, and III

C)

I, III, and IV

D)

II and IV

As a member of a team of financial advisors, a financial planner's responsibilities for a client typically include which of the following?

1. Helping the client identify financial goals
2. Drafting a power of attorney for the client
3. Analyzing the client's current financial status
4. Monitoring whether the client is complying with a plan after implementation

A)

I, II, III, and IV

B)

III and IV

C)

I and III

D)

I, III, and IV

In 2013, the average cost of a new home in Anytown was $200,000. Two years later, to the dismay of many prospective homeowners, the average cost rose to $250,000. Then in 2018, the average cost of a new home fell to $225,000, and the reaction to the decreased cost was positive, even though the new average cost was higher than the 2013 average cost of a new home. This behavior is known as

A)

mental accounting.

B)

anchoring.

C)

confirmation bias.

D)

herding.

Evelyn has heard from her friends that an investment in ABC stock was a wise idea because the company sells popular designer eyewear. Though you, as her financial planner, advise her that investing in this stock is a poor decision, Evelyn makes the investment anyway. Martin, another client of yours, considers his investment skills to be much greater than they actually are. He takes credit for any investment decisions that have positive returns, but blames the economy when his portfolio does poorly. In recent months, Considering Evelyn's and Martin's behavior, which of the following statements is CORRECT?

A)

Evelyn's behavior is representative of mental accounting; Martin's behavior is an example of confirmation bias.

B)

Evelyn's behavior is representative of overconfidence; Martin's behavior is an example of overconfidence.

C)

Evelyn's behavior is representative of anchoring; Martin's behavior is an example of mental accounting.

D)

Evelyn's behavior is representative of confirmation bias; Martin's behavior is an example of overconfidence.

A client's assessment of the magnitude of the risks being traded off is known as

A)

risk capacity.

B)

emotional intelligence.

C)

risk perception.

D)

risk tolerance.

Sharon, a CFP professional, practices financial planning in New York City. She is meeting with her client, Carla, to present the financial plan she has developed for her. Carla had advised Sharon that one of her goals is to follow a family tradition to take her twin granddaughters on a very expensive transatlantic cruise to Rome, their ancestors' homeland, to celebrate her granddaughters' 18th birthdays. Sharon feels this family tradition is nice but, because of Carla's financial situation, feels this is a poor use of her money. What should Sharon do to best serve her client, Carla?

1. Because Sharon, as Carla's financial planner, does not feel taking the trip is a wise financial decision, she should not include it in Carla's financial plan as a goal.
2. Sharon should understand that expensive trips to the homeland of Carla's ancestors is an important family tradition to Carla.
3. Sharon should consider the trip as one of Carla's goals and explain how such a goal would impact her overall financial plan.
4. Sharon should share her opinion with Carla and persuade her to abandon this as one of her goals.

A)

II and III

B)

II, III, and IV

C)

I only

D)

IV only

List these steps in the CORRECT order according to the financial planning communication model:

1. Financial planner: Message received, decoded, and interpreted
2. Client: Message received, decoded, and interpreted
3. Financial planner: Message encoded and sent
4. Client: Response message encoded and sent

A)

III, II, I, IV

B)

IV, I, II, III

C)

III, IV, I, II

D)

III, II, IV, I

In his financial planning practice, Ted assumes that clients are rational and will change to the most favorable behavior if given the appropriate counseling. He sees himself as the agent of change and focuses on obtaining and analyzing quantitative data such as cash flow, assets, and debt. Ted's approach to financial counseling is known as the

A)

classical economics approach.

B)

strategic management approach.

C)

economic and resource approach.

D)

cognitive behavioral approach.

Barry is meeting with his client, Mandy, to gather the information he needs to develop a financial plan. During the conversation, Barry imitates Mandy's gestures and physical positions and uses a similar tone of voice. Which communication skill(s) is Barry using to help develop a relationship of honesty and trust with Mandy?

1. Anchoring
2. Cognitive dissonance
3. Verbal mirroring
4. Physical mirroring

A)

II, III, and IV

B)

III and IV

C)

I, III, and IV

D)

I only

Which of the following statements regarding open-ended and closed-ended questions is CORRECT?

1. Planners should use as many closed-ended questions as possible when developing client goals and expectations.
2. Open-ended questions facilitate effective communication between the client and planner because they require the client to answer in her own words.

A)

I only

B)

Both I and II

C)

Neither I nor II

D)

II only

To interpret communication signs, it is most important to have the CORRECT

A)

form.

B)

mirroring skills.

C)

intrapersonal communication.

D)

deciphering codes.

Jillian is meeting with Maggie, a married client. During a discussion of Maggie's retirement planning, Maggie asks, "Should I contribute more to my 401(k) plan?" Jillian answers, "What type of lifestyle do you anticipate during retirement?" Maggie frowns, hangs her head, and responds, "I just want to have the extravagant lifestyle my husband, Tristen, wants us to have." Jillian does not find Maggie convincing. What type of communication is taking place between Jillian and Maggie?

1. Jillian is practicing verbal mirroring.
2. Jillian's answer to Maggie is a leading response.
3. Jillian is likely not convinced that Maggie wants to have the extravagant lifestyle Tristen wants due to Maggie's body language.

A)

II and III

B)

I and II

C)

I, II, and III

D)

I and III

All of the following would be included on a client's statement of financial position except

A)

the client's credit card balances.

B)

the client's salary.

C)

the client's checking account balance.

D)

the value of the client's hom