CFP Fundamentals of Financial Planning Course,
Questions with Answers 2025
Personal Financial Planning – 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 - Answers1. 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 - Answers- Obtain qualitative and
quantitative information
- Analyze information
- Address incomplete information
Identify and select goals - Answers- Identify potential goals
- Select and prioritize goals
Analyze current course of action and potential alternaties - Answers- Analyze current course of
action
- Analyze potential alternatives
Develop plan recommendations - Answers- Consider assumptions and estimates, as well as
basis for recommendation
, CFP Fundamentals of Financial Planning Course,
Questions with Answers 2025
- Consider timing and whether recommendation is independent
Present plan recommendations - Answers- Present recommendations
Implement plan recommendations - Answers- Address implementation responsibilities, as well
as products and services
- Select and implement actions, products, or services
Monitoring progress and updating - Answers- Monitoring and updating responsibilities
- Monitor progress toward goals and gather current information
- Update goals and recommendations
Financial Planning Process Acronym - AnswersUIADPIM
Understand, identify, analyze, develop, present, implement, and monitor
Benefits of financial planning - 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 - Answers
Humanistic - Answers
, CFP Fundamentals of Financial Planning Course,
Questions with Answers 2025
Cognitive-Behavioral - Answers
Traditional Finance/Modern Portfolio Theory - AnswersFour Basic Premises:
1. Investors are rational
2. Markets are efficient
3. Mean Variance Portfolio Governs
4. Returns are determined by risk
Behavioral Finance - AnswersBasic 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 - AnswersAttaching 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 - Answerstendency to filter information that only supports your opinion
Herding - AnswersPeople tend to follow the masses
Recency Bias - AnswersToo much weight to recent observations
Hindsight bias - Answersthe tendency to believe, after learning an outcome, that one would
have foreseen it
, CFP Fundamentals of Financial Planning Course,
Questions with Answers 2025
Overconfidence - Answersthe tendency to be more confident than correct
Overreaction - Answersto react or respond more strongly than is necessary or appropriate
Prospect theory - AnswersPeople value gains and losses differently. Decisions are based on
perceived gains rather than perceived losses
Disposition Effect - Answersinvestors are willing to realize gains but unwilling to realize losses
Mental Accounting - AnswersValuing 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 - 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 - 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 - 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 - Answers- Ages of client and partner
Questions with Answers 2025
Personal Financial Planning – 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 - Answers1. 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 - Answers- Obtain qualitative and
quantitative information
- Analyze information
- Address incomplete information
Identify and select goals - Answers- Identify potential goals
- Select and prioritize goals
Analyze current course of action and potential alternaties - Answers- Analyze current course of
action
- Analyze potential alternatives
Develop plan recommendations - Answers- Consider assumptions and estimates, as well as
basis for recommendation
, CFP Fundamentals of Financial Planning Course,
Questions with Answers 2025
- Consider timing and whether recommendation is independent
Present plan recommendations - Answers- Present recommendations
Implement plan recommendations - Answers- Address implementation responsibilities, as well
as products and services
- Select and implement actions, products, or services
Monitoring progress and updating - Answers- Monitoring and updating responsibilities
- Monitor progress toward goals and gather current information
- Update goals and recommendations
Financial Planning Process Acronym - AnswersUIADPIM
Understand, identify, analyze, develop, present, implement, and monitor
Benefits of financial planning - 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 - Answers
Humanistic - Answers
, CFP Fundamentals of Financial Planning Course,
Questions with Answers 2025
Cognitive-Behavioral - Answers
Traditional Finance/Modern Portfolio Theory - AnswersFour Basic Premises:
1. Investors are rational
2. Markets are efficient
3. Mean Variance Portfolio Governs
4. Returns are determined by risk
Behavioral Finance - AnswersBasic 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 - AnswersAttaching 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 - Answerstendency to filter information that only supports your opinion
Herding - AnswersPeople tend to follow the masses
Recency Bias - AnswersToo much weight to recent observations
Hindsight bias - Answersthe tendency to believe, after learning an outcome, that one would
have foreseen it
, CFP Fundamentals of Financial Planning Course,
Questions with Answers 2025
Overconfidence - Answersthe tendency to be more confident than correct
Overreaction - Answersto react or respond more strongly than is necessary or appropriate
Prospect theory - AnswersPeople value gains and losses differently. Decisions are based on
perceived gains rather than perceived losses
Disposition Effect - Answersinvestors are willing to realize gains but unwilling to realize losses
Mental Accounting - AnswersValuing 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 - 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 - 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 - 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 - Answers- Ages of client and partner
