CFP STUDY SET UPDATED ACTUAL
Exam Questions and CORRECT Answers
Financial Planning - CORRECT ANSWER - A collaborative process that helps maximize
a client's potential for meeting life goals through financial advice that integrates relevant
elements of the client's personal and financial circumstances.
Financial Planning Disclosures - CORRECT ANSWER - Everything in written documents
except material conflicts of interest which can be provided orally.
Step 1: Financial Planning Process - CORRECT ANSWER - Understanding the Client's
Personal and Financial Circumstances
Step 2: Financial Planning Process - CORRECT ANSWER - Identifying and selecting
goals
Step 3: Financial Planning Process - CORRECT ANSWER - Analyzing the Client's
Current Course of Action and Potential Alternative Course(s) of Action
Step 4: Financial Planning Process - CORRECT ANSWER - Developing the financial
planning recommendations
Step 5: Financial Planning Process - CORRECT ANSWER - Presenting the financial
planning recommendations
Step 6: Financial Planning Process - CORRECT ANSWER - Implementing the financial
planning recommendations
Step 7: Financial Planning Process - CORRECT ANSWER - Monitoring Progress and
Updating
, CFP Board's Code of Ethics - CORRECT ANSWER - 1. Act with honesty, integrity,
competence and diligence. 2. Act in the client's best interest. 3. Exercise due care. 4. Avoid or
disclose and manage conflicts of interest 5. Maintain the confidentiality and protect the privacy
of client's information 6. Act in a manner that reflects positively on the financial planning
profession and CFP certification.
Fiduciary Duty: Duty of Loyalty - CORRECT ANSWER - Involves placing the client's
interests ahead of the CFP professional, the firm, or any other entity. Includes avoiding or fully
disclosing, obtaining informed consent, and managing material conflicts of interest.
Fiduciary Duty: Duty of Care - CORRECT ANSWER - The CFP professional must engage
the client with care, skill, prudence, and diligence. Fulfillment of this duty requires consideration
of the client's goals, risk tolerance, objectives, and circumstances.
Fiduciary Duty: Duty to Follow Client Instructions - CORRECT ANSWER - CFP
professionals are obligated to adhere to the Terms of the Engagement and must follow reasonable
and lawful client instructions.
Snowball Technique - CORRECT ANSWER - smaller balances are paid off first so clients
feel encouraged by their success and motivated to continue the process
Avalanche Techinque - CORRECT ANSWER - Prioritizes high-interest debt to save
money, but it may take longer to get the first debt eliminated
American Opportunity Tax Credit - CORRECT ANSWER - Equals 100% of the first
$2000 of qualified expenses paid in the tax year, plus 25% of the next $2000. The maximum
credit allowed in a given year is $2500 per student if there are $4000 of qualifying expenses.
Room and board are excluded. Up to 40% of credit is refundable. Only on first 4 years.
Lifetime Learning Credit - CORRECT ANSWER - $2000 per year. Must spend $10,000
annually on qualified expenses to receive full credit. Available during undergraduate and
graduate levels. Can be claimed an unlimited amount of years. Can only use 1 credit per person
per year.
Exam Questions and CORRECT Answers
Financial Planning - CORRECT ANSWER - A collaborative process that helps maximize
a client's potential for meeting life goals through financial advice that integrates relevant
elements of the client's personal and financial circumstances.
Financial Planning Disclosures - CORRECT ANSWER - Everything in written documents
except material conflicts of interest which can be provided orally.
Step 1: Financial Planning Process - CORRECT ANSWER - Understanding the Client's
Personal and Financial Circumstances
Step 2: Financial Planning Process - CORRECT ANSWER - Identifying and selecting
goals
Step 3: Financial Planning Process - CORRECT ANSWER - Analyzing the Client's
Current Course of Action and Potential Alternative Course(s) of Action
Step 4: Financial Planning Process - CORRECT ANSWER - Developing the financial
planning recommendations
Step 5: Financial Planning Process - CORRECT ANSWER - Presenting the financial
planning recommendations
Step 6: Financial Planning Process - CORRECT ANSWER - Implementing the financial
planning recommendations
Step 7: Financial Planning Process - CORRECT ANSWER - Monitoring Progress and
Updating
, CFP Board's Code of Ethics - CORRECT ANSWER - 1. Act with honesty, integrity,
competence and diligence. 2. Act in the client's best interest. 3. Exercise due care. 4. Avoid or
disclose and manage conflicts of interest 5. Maintain the confidentiality and protect the privacy
of client's information 6. Act in a manner that reflects positively on the financial planning
profession and CFP certification.
Fiduciary Duty: Duty of Loyalty - CORRECT ANSWER - Involves placing the client's
interests ahead of the CFP professional, the firm, or any other entity. Includes avoiding or fully
disclosing, obtaining informed consent, and managing material conflicts of interest.
Fiduciary Duty: Duty of Care - CORRECT ANSWER - The CFP professional must engage
the client with care, skill, prudence, and diligence. Fulfillment of this duty requires consideration
of the client's goals, risk tolerance, objectives, and circumstances.
Fiduciary Duty: Duty to Follow Client Instructions - CORRECT ANSWER - CFP
professionals are obligated to adhere to the Terms of the Engagement and must follow reasonable
and lawful client instructions.
Snowball Technique - CORRECT ANSWER - smaller balances are paid off first so clients
feel encouraged by their success and motivated to continue the process
Avalanche Techinque - CORRECT ANSWER - Prioritizes high-interest debt to save
money, but it may take longer to get the first debt eliminated
American Opportunity Tax Credit - CORRECT ANSWER - Equals 100% of the first
$2000 of qualified expenses paid in the tax year, plus 25% of the next $2000. The maximum
credit allowed in a given year is $2500 per student if there are $4000 of qualifying expenses.
Room and board are excluded. Up to 40% of credit is refundable. Only on first 4 years.
Lifetime Learning Credit - CORRECT ANSWER - $2000 per year. Must spend $10,000
annually on qualified expenses to receive full credit. Available during undergraduate and
graduate levels. Can be claimed an unlimited amount of years. Can only use 1 credit per person
per year.
