CFP Exam Unit 1 - July 2022 with Updated Questions and Answers

CFP Exam Unit 1 - July 2022 with Updated Questions and Answers Steps to Financial Planning - EGADCIM - CORRECT ANSWER 1. Establishing and defining the client planner relationship 2. Gathering information necessary to fulfill the engagement 3. Analyzing and evaluating the client's current financial status 4. Developing the recommendations 5. Communicating the recommendations 6. Implementing the recommendations 7. Monitoring the recommendations Eight Principal Knowledge Categories - CORRECT ANSWER 1. Professional Conduct & Regulation 2. General Financial Planning Principles 3. Education Planning 4. Risk Management and Insurance Planning 5. Investment Planning 6. Tax Planning 7. Retirement Savings and Income Planning 8. Estate Planning Gathering information necessary to fulfill the engagement - CORRECT ANSWER A. Identify the client's values and attitudes 1. Financial needs, priorities and goals 2. Time horizon 3. Level of knowledge/experience with financial matters 4. Risk exposures (longevity, economic, liability, healthcare) 5. Risk tolerances (investment, economic, liability, healthcare) B. Gather Data 1. Summary of assets 2. Summary of liabilities 3. Summary of income and expenses 4. Estate planning documents 5. Education plans and resources 6. Retirement plan information - employer and individual 7. Employee benefits info 8. Government benefits - SS, Medicare, Veteran's Benefits 9. Special circumstances - legal docs and agreement, family situations 10. Tax returns/other documents 11. Investment account statements 12. Insurance policies - life, health, disability, liability 13. Closely held business documents - shareholder agreements 14. Information regarding inheritances, windfalls, and other large lump sums CFP board definition of Financial Planning - CORRECT ANSWER A collaborative process intended to maximize a client's potential for meeting life goals applying financial advice that considers relevant aspects of the client's financial and personal life. Under the CFP Board's Practice Standards, what is the most important matter to consider? - CORRECT ANSWER Whether the client's best interests are being served Qualitative Data - CORRECT ANSWER Qualitative data is considered to be subjective data and generally focuses on the client's emotions and wishes/hopes. Examples: Financial goals Priorities Risk tolerance (risk comfort level) Health presumptions Life expectancy Family circumstances Ethical and religious values Expectations Current financial planning actions Quantitative Data - CORRECT ANSWER Quantitative data is generally factual rather than attitudinal. Examples: Age Dependents Other professional financial, tax, and legal advisors Income and expenses (cash flow) Assets and liabilities (net worth) Savings Available resources Investment accounts amounts and allocations Risk capacity (risk level necessary to achieve financial goals) Government benefits Employee benefits Amount and allocation of retirement accounts Tax exposures Insurance coverages and ownership Estate plans Client Data Collection Sheet - Family Tree - CORRECT ANSWER Info: Name, DOB, Health status, relationship to client Used to determine: Life expectancy of client Insurability of client Retirement needs of client Special needs of client and family members