CFP — Certified Financial Planner Exam
Practice Bank (2026 Latest Edition) |
Verified Exam Questions, Correct Answers
& Rationales | Full Certification Prep |
Instant Download
1. What is the primary goal of financial planning?
a) Maximizing investment returns
b) Helping clients achieve their life goals through proper financial
management
c) Reducing tax liability
d) Increasing short-term cash flow
Rationale: The CFP Board defines financial planning as helping clients
achieve their life goals through proper management of their
finances.
2. Which of the following best describes the fiduciary duty of a CFP
professional?
, a) Acting in the client’s best interest only if compensated
b) Always placing the client’s interests above their own
c) Disclosing conflicts only when asked
d) Ensuring profitability of the financial plan
Rationale: CFP professionals must act as fiduciaries, placing the
client’s interest above their own at all times.
3. What is the first step in the financial planning process?
a) Understanding the client’s personal and financial circumstances
b) Developing financial planning recommendations
c) Implementing recommendations
d) Monitoring progress
Rationale: The first step involves gathering data about the client’s
goals, values, and current financial situation.
4. A client has a high income but low savings. What financial planning
concern should be prioritized?
a) Tax optimization
b) Cash flow management
c) Estate planning
d) Asset allocation
Rationale: Poor savings despite high income indicates a cash flow
management issue that must be addressed first.
5. Which type of risk refers to the chance that an investment’s return will
differ from expectations due to market-wide changes?
, a) Systematic risk
b) Unsystematic risk
c) Business risk
d) Liquidity risk
Rationale: Systematic risk affects all investments and cannot be
diversified away.
6. The time value of money principle implies that:
a) Money today and money tomorrow have the same value
b) Future money is worth more than present money
c) Present money is worth more than future money
d) Inflation does not affect purchasing power
Rationale: Due to potential earning capacity, money today has more
value than the same amount in the future.
7. If a client wants to fund their child’s education in 15 years, which type
of account is most suitable?
a) Traditional IRA
b) 401(k) plan
c) 529 college savings plan
d) Money market account
Rationale: 529 plans provide tax-advantaged growth for education
expenses.
8. Which of the following is considered a quantitative data point in
financial planning?
, a) Client’s income and expenses
b) Client’s values
c) Client’s goals
d) Client’s risk tolerance
Rationale: Quantitative data includes measurable financial figures
such as income, expenses, and net worth.
9. A diversified investment portfolio helps primarily to:
a) Increase returns
b) Reduce unsystematic risk
c) Eliminate systematic risk
d) Maximize tax efficiency
Rationale: Diversification reduces company-specific (unsystematic)
risk, but not market-wide risk.
10. Which of the following assets is most liquid?
a) Real estate
b) Certificates of deposit
c) Cash
d) Mutual funds
Rationale: Cash is the most liquid asset since it can be immediately
used without conversion.
11. Which estate planning document allows a person to appoint
someone to make health decisions if incapacitated?
Practice Bank (2026 Latest Edition) |
Verified Exam Questions, Correct Answers
& Rationales | Full Certification Prep |
Instant Download
1. What is the primary goal of financial planning?
a) Maximizing investment returns
b) Helping clients achieve their life goals through proper financial
management
c) Reducing tax liability
d) Increasing short-term cash flow
Rationale: The CFP Board defines financial planning as helping clients
achieve their life goals through proper management of their
finances.
2. Which of the following best describes the fiduciary duty of a CFP
professional?
, a) Acting in the client’s best interest only if compensated
b) Always placing the client’s interests above their own
c) Disclosing conflicts only when asked
d) Ensuring profitability of the financial plan
Rationale: CFP professionals must act as fiduciaries, placing the
client’s interest above their own at all times.
3. What is the first step in the financial planning process?
a) Understanding the client’s personal and financial circumstances
b) Developing financial planning recommendations
c) Implementing recommendations
d) Monitoring progress
Rationale: The first step involves gathering data about the client’s
goals, values, and current financial situation.
4. A client has a high income but low savings. What financial planning
concern should be prioritized?
a) Tax optimization
b) Cash flow management
c) Estate planning
d) Asset allocation
Rationale: Poor savings despite high income indicates a cash flow
management issue that must be addressed first.
5. Which type of risk refers to the chance that an investment’s return will
differ from expectations due to market-wide changes?
, a) Systematic risk
b) Unsystematic risk
c) Business risk
d) Liquidity risk
Rationale: Systematic risk affects all investments and cannot be
diversified away.
6. The time value of money principle implies that:
a) Money today and money tomorrow have the same value
b) Future money is worth more than present money
c) Present money is worth more than future money
d) Inflation does not affect purchasing power
Rationale: Due to potential earning capacity, money today has more
value than the same amount in the future.
7. If a client wants to fund their child’s education in 15 years, which type
of account is most suitable?
a) Traditional IRA
b) 401(k) plan
c) 529 college savings plan
d) Money market account
Rationale: 529 plans provide tax-advantaged growth for education
expenses.
8. Which of the following is considered a quantitative data point in
financial planning?
, a) Client’s income and expenses
b) Client’s values
c) Client’s goals
d) Client’s risk tolerance
Rationale: Quantitative data includes measurable financial figures
such as income, expenses, and net worth.
9. A diversified investment portfolio helps primarily to:
a) Increase returns
b) Reduce unsystematic risk
c) Eliminate systematic risk
d) Maximize tax efficiency
Rationale: Diversification reduces company-specific (unsystematic)
risk, but not market-wide risk.
10. Which of the following assets is most liquid?
a) Real estate
b) Certificates of deposit
c) Cash
d) Mutual funds
Rationale: Cash is the most liquid asset since it can be immediately
used without conversion.
11. Which estate planning document allows a person to appoint
someone to make health decisions if incapacitated?
