CFP Fundamentals of Financial
Planning Course Exam with Questions
and Correct Answers 2025
Personal Financial Planning - CORRECT ANSWERS The process of formulating,
implementing, and monitoring financial decisions into an integrated plan that
guides an individual or a family to achieve their financial goals
Financial Planning Process - CORRECT ANSWERS 1. Understand the clients
personal and financial circumstances
2. Identifying and selecting goals
3. Analyses current course of action and potential alternatives
4. Develop plan recommendations
5. Present plan recommendations
6. Implement plan recommendations
7. Monitor progress and update as needed
Understand client's personal and financial circumstance - CORRECT ANSWERS -
Obtain qualitative and quantitative information
- Analyze information
- Address incomplete information
Identify and select goals - CORRECT ANSWERS - Identify potential goals
- Select and prioritize goals
Analyze current course of action and potential alternaties - CORRECT ANSWERS -
Analyze current course of action
- Analyze potential alternatives
Develop plan recommendations - CORRECT ANSWERS - Consider assumptions
and estimates, as well as basis for recommendation
- Consider timing and whether recommendation is independent
Present plan recommendations - CORRECT ANSWERS - Present recommendations
Implement plan recommendations - CORRECT ANSWERS - Address
implementation responsibilities, as well as products and services
,- Select and implement actions, products, or services
Monitoring progress and updating - CORRECT ANSWERS - Monitoring and
updating responsibilities
- Monitor progress toward goals and gather current information
- Update goals and recommendations
Financial Planning Process Acronym - CORRECT ANSWERS UIADPIM
Understand, identify, analyze, develop, present, implement, and monitor
Benefits of financial planning - CORRECT ANSWERS - Identify risks and establish
goals
- Anticipate where needs exist and where new risks may arise
- Establish benchmarks within a finite time frame
- Help keep client focused
- Gives client confidence
Developmental - CORRECT ANSWERS
Humanistic - CORRECT ANSWERS
Cognitive-Behavioral - CORRECT ANSWERS
Traditional Finance/Modern Portfolio Theory - CORRECT ANSWERS Four Basic
Premises:
1. Investors are rational
2. Markets are efficient
3. Mean Variance Portfolio Governs
4. Returns are determined by risk
Behavioral Finance - CORRECT ANSWERS Basic Premises:
1. Investors are normal people with cognitive biases and make errors
2. Markets are not efficient
3. Behavioral portfolio theory governs
4. Risk alone does not determine returns
Anchoring - CORRECT ANSWERS Attaching one's thoughts to a reference point
even though there may be no relevance or is not pertinent to the issue at hand
Confirmation Bias - CORRECT ANSWERS tendency to filter information that only
supports your opinion
Herding - CORRECT ANSWERS People tend to follow the masses
Recency Bias - CORRECT ANSWERS Too much weight to recent observations
, Hindsight bias - CORRECT ANSWERS the tendency to believe, after learning an
outcome, that one would have foreseen it
Overconfidence - CORRECT ANSWERS the tendency to be more confident than
correct
Overreaction - CORRECT ANSWERS to react or respond more strongly than is
necessary or appropriate
Prospect theory - CORRECT ANSWERS People value gains and losses differently.
Decisions are based on perceived gains rather than perceived losses
Disposition Effect - CORRECT ANSWERS investors are willing to realize gains but
unwilling to realize losses
Mental Accounting - CORRECT ANSWERS Valuing your money differently in your
head based on their proposed uses ie easier to spend on a vacation than on debt
Life cycle approach overview - CORRECT ANSWERS - Data collection is quick,
simple, and nonthreatening
- Brief overview of financial profile to assist with initial conversation
- Used early in engagement
Pie chart approach overview - CORRECT ANSWERS - Visual representation of
financial resources and how they are utilized
- Revealing to client on cash flow sources and their uses
Financial statement and ratio analysis approach overview - CORRECT ANSWERS -
Establishes financial snapshot as of today
- Opportunity to asses client's strengths, weaknesses, and deficiencies
- Easy to compare to benchmarks
Information collected during life cycle approach - CORRECT ANSWERS - Ages of
client and partner
- Marital status
- Number/ages of children/grandchildren
- Family income
- Family net worth
- Employment status
Asset accumulation phase - CORRECT ANSWERS - Early 20s to mid 50s
- Discretionary cash flow for investing is low
- Debt to net worth ratio is high
Conservation (risk management) phase - CORRECT ANSWERS - Late 20s to early
70s
Planning Course Exam with Questions
and Correct Answers 2025
Personal Financial Planning - CORRECT ANSWERS The process of formulating,
implementing, and monitoring financial decisions into an integrated plan that
guides an individual or a family to achieve their financial goals
Financial Planning Process - CORRECT ANSWERS 1. Understand the clients
personal and financial circumstances
2. Identifying and selecting goals
3. Analyses current course of action and potential alternatives
4. Develop plan recommendations
5. Present plan recommendations
6. Implement plan recommendations
7. Monitor progress and update as needed
Understand client's personal and financial circumstance - CORRECT ANSWERS -
Obtain qualitative and quantitative information
- Analyze information
- Address incomplete information
Identify and select goals - CORRECT ANSWERS - Identify potential goals
- Select and prioritize goals
Analyze current course of action and potential alternaties - CORRECT ANSWERS -
Analyze current course of action
- Analyze potential alternatives
Develop plan recommendations - CORRECT ANSWERS - Consider assumptions
and estimates, as well as basis for recommendation
- Consider timing and whether recommendation is independent
Present plan recommendations - CORRECT ANSWERS - Present recommendations
Implement plan recommendations - CORRECT ANSWERS - Address
implementation responsibilities, as well as products and services
,- Select and implement actions, products, or services
Monitoring progress and updating - CORRECT ANSWERS - Monitoring and
updating responsibilities
- Monitor progress toward goals and gather current information
- Update goals and recommendations
Financial Planning Process Acronym - CORRECT ANSWERS UIADPIM
Understand, identify, analyze, develop, present, implement, and monitor
Benefits of financial planning - CORRECT ANSWERS - Identify risks and establish
goals
- Anticipate where needs exist and where new risks may arise
- Establish benchmarks within a finite time frame
- Help keep client focused
- Gives client confidence
Developmental - CORRECT ANSWERS
Humanistic - CORRECT ANSWERS
Cognitive-Behavioral - CORRECT ANSWERS
Traditional Finance/Modern Portfolio Theory - CORRECT ANSWERS Four Basic
Premises:
1. Investors are rational
2. Markets are efficient
3. Mean Variance Portfolio Governs
4. Returns are determined by risk
Behavioral Finance - CORRECT ANSWERS Basic Premises:
1. Investors are normal people with cognitive biases and make errors
2. Markets are not efficient
3. Behavioral portfolio theory governs
4. Risk alone does not determine returns
Anchoring - CORRECT ANSWERS Attaching one's thoughts to a reference point
even though there may be no relevance or is not pertinent to the issue at hand
Confirmation Bias - CORRECT ANSWERS tendency to filter information that only
supports your opinion
Herding - CORRECT ANSWERS People tend to follow the masses
Recency Bias - CORRECT ANSWERS Too much weight to recent observations
, Hindsight bias - CORRECT ANSWERS the tendency to believe, after learning an
outcome, that one would have foreseen it
Overconfidence - CORRECT ANSWERS the tendency to be more confident than
correct
Overreaction - CORRECT ANSWERS to react or respond more strongly than is
necessary or appropriate
Prospect theory - CORRECT ANSWERS People value gains and losses differently.
Decisions are based on perceived gains rather than perceived losses
Disposition Effect - CORRECT ANSWERS investors are willing to realize gains but
unwilling to realize losses
Mental Accounting - CORRECT ANSWERS Valuing your money differently in your
head based on their proposed uses ie easier to spend on a vacation than on debt
Life cycle approach overview - CORRECT ANSWERS - Data collection is quick,
simple, and nonthreatening
- Brief overview of financial profile to assist with initial conversation
- Used early in engagement
Pie chart approach overview - CORRECT ANSWERS - Visual representation of
financial resources and how they are utilized
- Revealing to client on cash flow sources and their uses
Financial statement and ratio analysis approach overview - CORRECT ANSWERS -
Establishes financial snapshot as of today
- Opportunity to asses client's strengths, weaknesses, and deficiencies
- Easy to compare to benchmarks
Information collected during life cycle approach - CORRECT ANSWERS - Ages of
client and partner
- Marital status
- Number/ages of children/grandchildren
- Family income
- Family net worth
- Employment status
Asset accumulation phase - CORRECT ANSWERS - Early 20s to mid 50s
- Discretionary cash flow for investing is low
- Debt to net worth ratio is high
Conservation (risk management) phase - CORRECT ANSWERS - Late 20s to early
70s
