FP1 FULL PRACTICE EXAM |80 Questions with 100%
Correct Answers | Updated & Verified
Which statement regarding the traits or values of financial advisors is correct?
A. Professionalism is displayed by being competent and knowledgeable.
B. Diligence is displayed by being honest with clients.
C. Objectivity requires respecting clients' privacy.
D. Confidentiality requires the advisor to make impartial recommendations. -
ANSWER A. Professionalism is displayed by being competent and knowledgeable.
Professionalism is displayed by being competent and knowledgeable by keeping up
to date regarding key aspects of the financial services industry.
By and large, what statement below is true in regards to the current landscape in
Canada for financial advisors?
A. There has been a dramatic shift to fee based advice as it's perceived as unbiased.
B. The role has shifted to a client driven model where building a strong client
relationship is key.
C. The business is now product driven where it's all about selling higher
commissioned products.
D. The industry is focusing on reducing costs and finding the most inexpensive
investments for clients. - ANSWER B. The role has shifted to a client driven model
where building a strong client relationship is key.
The role of the Advisor in the financial services industry has changed in recent years
from one that is product driven to one that is client driven. Reference: Module 1,
Section 1
Which statements about the evolution of the role of financial advisors is/are correct?
[I] The financial services industry has moved towards an integrated market and so
have advisors.
[II] Advisors have fewer products and services to offer to clients.
[III] Advisors require a greater level of knowledge to recommend sophisticated
alternatives to clients.
A. I only.
B. I and III only.
C. II and III only.
D. I and II only. - ANSWER B. I and III only.
Advisors have to work within a highly integrated financial services market and must
possess a much higher level of knowledge than before to satisfy increasingly
sophisticated clients.
Select the first step in the financial planning process.
,A. Analyzing a client's data and information.
B. Recommending strategies to meet goals.
C. Establishing a relationship with the client.
D. Collecting a client's data and information. - ANSWER C. Establishing a
relationship with the client.
The first step in the financial planning process is for an advisor to establish a
relationship with the client; everything else follows.
Select the item that would provide you with quantitative data about your new client.
A. Profit sharing plan statement.
B. Risk tolerance assessment.
C. Goal setting questionnaire.
D. Fees and services agreement. - ANSWER A. Profit sharing plan statement.
Only the profit-sharing statement would provide you with quantitative data, i.e.
numeric or other specific data that can be quantified. The other options would
provide qualitative data. Reference: Module 1, Section 2.
Your client's goal is to improve her cash flow. Select the strategy that will be most
effective in helping her to reach her goal.
A. Improve investment return.
B. Reduce flexible expenses and lengthen time frame for investments.
C. Increase income and reduce expenses.
D. Contribute regularly to an emergency fund. - ANSWER C. Increase income and
reduce expenses.
Cash flow is the amount of money available for investment or other purposes. In this
scenario, the client is best able to free up money for investments by increasing the
amount of money coming in (income) and reducing the amount of money going out
(expenses). While (b) would improve cash flow by reducing some expenses, the
addition of the increase in income in (c) makes it more effective.
Kim does not recommend an investment fund to her clients that is heavily promoted
by her own firm's marketing department because her analysis demonstrates that it is
not consistent for her clients' goals. Select the type of responsibility that she is
demonstrating.
A. Integrity.
B. Professionalism.
C. Objectivity.
D. Diligence. - ANSWER C. Objectivity.
Kim is fulfilling the responsibility of "Objectivity" which states that an adviser must not
make recommendations that benefit the adviser or the adviser's institution when
there are other products and services that might serve an adviser's clients better.
Reference: Module 1, Section 2.
, Select the most useful goal for setting investment priorities.
A. "I'm not sure when we'll retire, but we want to be able to travel for 10 or so years
at that time."
B. "We want to buy a big house in a nice neighbourhood"
C. "We will need 70% of our current income level to retire and maintain our lifestyle."
D. "I want to be able to retire comfortably based on my current lifestyle." - ANSWER
C. "We will need 70% of our current income level to retire and maintain our lifestyle."
General Feedback:
Options a, b, and d are not measurable or quantifiable; only c is measurable and
quantifiable. Thus, only "c" is usual for setting priorities. Encouraging clients to set
specific, measurable targets instead of vague and general goals serves two
functions:
It helps to clearly and explicitly define financial objectives.
It helps to measure and monitor the performance of the financial plan.
Reference: Module 1, Section 2
Nabila, an advisor, receives a call from an insurance broker asking for information
about the assets she manages for a client. Nabila refuses to speak to the broker
about her client without the client's permission. What type of responsibility is he
demonstrating?
A. Integrity.
B. Professionalism.
C. Confidentiality.
D. Diligence. - ANSWER C. Confidentiality.
General Feedback: Nabila is fulfilling the responsibility of Confidentiality, which
states that an adviser must respect a clients' privacy and treat their information with
confidentiality. Reference: Module 1, Section 2.
Haseeb is an advisor who regularly attends industry seminars and takes continuing
education courses. What type of responsibility is he demonstrating?
A. Integrity.
B. Professionalism.
C. Objectivity.
D. Diligence. - ANSWER B. Professionalism.
Haseeb is demonstrating the responsibility of professionalism, which states that an
advisor must be competent, knowledgeable and up to date regarding all aspects of
the financial services industry. Reference: Module 1, Section 2.
Which statement best describes an efficient financial
plan?
A. A plan that delivers the desired results.
Correct Answers | Updated & Verified
Which statement regarding the traits or values of financial advisors is correct?
A. Professionalism is displayed by being competent and knowledgeable.
B. Diligence is displayed by being honest with clients.
C. Objectivity requires respecting clients' privacy.
D. Confidentiality requires the advisor to make impartial recommendations. -
ANSWER A. Professionalism is displayed by being competent and knowledgeable.
Professionalism is displayed by being competent and knowledgeable by keeping up
to date regarding key aspects of the financial services industry.
By and large, what statement below is true in regards to the current landscape in
Canada for financial advisors?
A. There has been a dramatic shift to fee based advice as it's perceived as unbiased.
B. The role has shifted to a client driven model where building a strong client
relationship is key.
C. The business is now product driven where it's all about selling higher
commissioned products.
D. The industry is focusing on reducing costs and finding the most inexpensive
investments for clients. - ANSWER B. The role has shifted to a client driven model
where building a strong client relationship is key.
The role of the Advisor in the financial services industry has changed in recent years
from one that is product driven to one that is client driven. Reference: Module 1,
Section 1
Which statements about the evolution of the role of financial advisors is/are correct?
[I] The financial services industry has moved towards an integrated market and so
have advisors.
[II] Advisors have fewer products and services to offer to clients.
[III] Advisors require a greater level of knowledge to recommend sophisticated
alternatives to clients.
A. I only.
B. I and III only.
C. II and III only.
D. I and II only. - ANSWER B. I and III only.
Advisors have to work within a highly integrated financial services market and must
possess a much higher level of knowledge than before to satisfy increasingly
sophisticated clients.
Select the first step in the financial planning process.
,A. Analyzing a client's data and information.
B. Recommending strategies to meet goals.
C. Establishing a relationship with the client.
D. Collecting a client's data and information. - ANSWER C. Establishing a
relationship with the client.
The first step in the financial planning process is for an advisor to establish a
relationship with the client; everything else follows.
Select the item that would provide you with quantitative data about your new client.
A. Profit sharing plan statement.
B. Risk tolerance assessment.
C. Goal setting questionnaire.
D. Fees and services agreement. - ANSWER A. Profit sharing plan statement.
Only the profit-sharing statement would provide you with quantitative data, i.e.
numeric or other specific data that can be quantified. The other options would
provide qualitative data. Reference: Module 1, Section 2.
Your client's goal is to improve her cash flow. Select the strategy that will be most
effective in helping her to reach her goal.
A. Improve investment return.
B. Reduce flexible expenses and lengthen time frame for investments.
C. Increase income and reduce expenses.
D. Contribute regularly to an emergency fund. - ANSWER C. Increase income and
reduce expenses.
Cash flow is the amount of money available for investment or other purposes. In this
scenario, the client is best able to free up money for investments by increasing the
amount of money coming in (income) and reducing the amount of money going out
(expenses). While (b) would improve cash flow by reducing some expenses, the
addition of the increase in income in (c) makes it more effective.
Kim does not recommend an investment fund to her clients that is heavily promoted
by her own firm's marketing department because her analysis demonstrates that it is
not consistent for her clients' goals. Select the type of responsibility that she is
demonstrating.
A. Integrity.
B. Professionalism.
C. Objectivity.
D. Diligence. - ANSWER C. Objectivity.
Kim is fulfilling the responsibility of "Objectivity" which states that an adviser must not
make recommendations that benefit the adviser or the adviser's institution when
there are other products and services that might serve an adviser's clients better.
Reference: Module 1, Section 2.
, Select the most useful goal for setting investment priorities.
A. "I'm not sure when we'll retire, but we want to be able to travel for 10 or so years
at that time."
B. "We want to buy a big house in a nice neighbourhood"
C. "We will need 70% of our current income level to retire and maintain our lifestyle."
D. "I want to be able to retire comfortably based on my current lifestyle." - ANSWER
C. "We will need 70% of our current income level to retire and maintain our lifestyle."
General Feedback:
Options a, b, and d are not measurable or quantifiable; only c is measurable and
quantifiable. Thus, only "c" is usual for setting priorities. Encouraging clients to set
specific, measurable targets instead of vague and general goals serves two
functions:
It helps to clearly and explicitly define financial objectives.
It helps to measure and monitor the performance of the financial plan.
Reference: Module 1, Section 2
Nabila, an advisor, receives a call from an insurance broker asking for information
about the assets she manages for a client. Nabila refuses to speak to the broker
about her client without the client's permission. What type of responsibility is he
demonstrating?
A. Integrity.
B. Professionalism.
C. Confidentiality.
D. Diligence. - ANSWER C. Confidentiality.
General Feedback: Nabila is fulfilling the responsibility of Confidentiality, which
states that an adviser must respect a clients' privacy and treat their information with
confidentiality. Reference: Module 1, Section 2.
Haseeb is an advisor who regularly attends industry seminars and takes continuing
education courses. What type of responsibility is he demonstrating?
A. Integrity.
B. Professionalism.
C. Objectivity.
D. Diligence. - ANSWER B. Professionalism.
Haseeb is demonstrating the responsibility of professionalism, which states that an
advisor must be competent, knowledgeable and up to date regarding all aspects of
the financial services industry. Reference: Module 1, Section 2.
Which statement best describes an efficient financial
plan?
A. A plan that delivers the desired results.
