FPQP Exam Review QUESTIONS AND VERIFIED DETAILED ANSWERS |ALREADY
GRADED A+| 2024/2025 UPDATE
7 Steps of the Financial Planning Process
1. Understanding the client's personal and financial circumstances
2. Identifying and selecting goals
3. Analyzing the client's current course of action and potential alternative course(s) of action
4. Developing the financial planning recommendations
5. Presenting the financial planning recommendations
6. Implementing the financial planning recommendations
7. Monitoring progress and updating
Financial planning is
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.
Areas of financial planning:
Developing goals, cash and debt management, risk management and insurance planning,
education needs, group benefits planning, investment planning, retirement savings and income
planning, tax planning, estate planning
A comprehensive financial plan:
addresses most, if not all, of the client's circumstances
A targeted financial plan:
addresses only 1 or 2 of the client's objectives
Planners help _____ and _____ goals and objectives
identify, prioritize
Steps to setting a financial goal:
Purpose, Timeframe, Amount (PTA)
Defining the engagement:
- identifying the service(s) to be provided, and those that will be excluded
- disclosing the planner's compensation arrangement(s)
- disclosing existing and/or potential conflicts of interest
- determining the responsibilities of both the planner and client
,- establishing the duration of the engagement
- providing any additional information necessary to determine, define, or limit the scope of the
engagement
Financial planners are compensated by:
sales (commission), fees (only), or a combination of both
True or false: the use of other professionals is often necessary for clients to meet their goals
as not one planner can know everything about financial planning
true
Behavioral Finance:
a field of study that relates behavioral and cognitive psychology to financial planning and
economics in an attempt to understand why people act irrationally during the financial decision-
making process
The 2 types of biases:
Cognitive errors and emotional biases
Cognitive errors:
decision-making based on well-known concepts that may or may not be correct
Emotional biases:
which often occur impulsively based on the feelings of an individual when a choice is made
List off the cognitive errors:
Illusion of control
Money illusion
Conservation bias
Mental accounting
Self-attribution bias
self-control bias
List off the emotional biases:
self-control bias
status quo bias
affinity bias
Financial planners should be using what type of questions during the interview
open-ended
, Non-directive counseling skills:
clarification, paraphrasing, summarizing
Directive counseling skills:
reframing, explanation, advice
FPQP code of ethics:
1. adherence to the Standards of Professional Conduct
2. self-disclosure of prior allegations or violations
3. adherence to the Terms and Conditions
The standards of professional conduct are:
Fiduciary duty, integrity, competence, diligence, professionalism, confidentiality
the fiduciary standard:
1. Put a client's interests first
2. To act with utmost good faith
3. To provide full and adequate disclosure of all material facts
4. To refrain from misleading clients
5. To expose all conflicts of interests to clients
Statement of financial position (balance sheet)
A snapshot of the financial situation as of the given date. It is a complete representation of
financial assets and liabilities. It is a statement of net worth
Assets are separated into these 3 categories
Cash/cash equivalents, invested assets, use assets
Liabilities:
include any debt of an individual, such as balances for mortgage loans, auto loans, and credit
cards. They are categorized as short term or long term
Cash flow statement:
reveals cash receipts and disbursements over a specific past period, usually 1 year. It
summarizes the inflows and outflows of cash, showing all sources of income and patterns of
spending, saving, and investing.
Benchmark for the front-end ratio
28%
GRADED A+| 2024/2025 UPDATE
7 Steps of the Financial Planning Process
1. Understanding the client's personal and financial circumstances
2. Identifying and selecting goals
3. Analyzing the client's current course of action and potential alternative course(s) of action
4. Developing the financial planning recommendations
5. Presenting the financial planning recommendations
6. Implementing the financial planning recommendations
7. Monitoring progress and updating
Financial planning is
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.
Areas of financial planning:
Developing goals, cash and debt management, risk management and insurance planning,
education needs, group benefits planning, investment planning, retirement savings and income
planning, tax planning, estate planning
A comprehensive financial plan:
addresses most, if not all, of the client's circumstances
A targeted financial plan:
addresses only 1 or 2 of the client's objectives
Planners help _____ and _____ goals and objectives
identify, prioritize
Steps to setting a financial goal:
Purpose, Timeframe, Amount (PTA)
Defining the engagement:
- identifying the service(s) to be provided, and those that will be excluded
- disclosing the planner's compensation arrangement(s)
- disclosing existing and/or potential conflicts of interest
- determining the responsibilities of both the planner and client
,- establishing the duration of the engagement
- providing any additional information necessary to determine, define, or limit the scope of the
engagement
Financial planners are compensated by:
sales (commission), fees (only), or a combination of both
True or false: the use of other professionals is often necessary for clients to meet their goals
as not one planner can know everything about financial planning
true
Behavioral Finance:
a field of study that relates behavioral and cognitive psychology to financial planning and
economics in an attempt to understand why people act irrationally during the financial decision-
making process
The 2 types of biases:
Cognitive errors and emotional biases
Cognitive errors:
decision-making based on well-known concepts that may or may not be correct
Emotional biases:
which often occur impulsively based on the feelings of an individual when a choice is made
List off the cognitive errors:
Illusion of control
Money illusion
Conservation bias
Mental accounting
Self-attribution bias
self-control bias
List off the emotional biases:
self-control bias
status quo bias
affinity bias
Financial planners should be using what type of questions during the interview
open-ended
, Non-directive counseling skills:
clarification, paraphrasing, summarizing
Directive counseling skills:
reframing, explanation, advice
FPQP code of ethics:
1. adherence to the Standards of Professional Conduct
2. self-disclosure of prior allegations or violations
3. adherence to the Terms and Conditions
The standards of professional conduct are:
Fiduciary duty, integrity, competence, diligence, professionalism, confidentiality
the fiduciary standard:
1. Put a client's interests first
2. To act with utmost good faith
3. To provide full and adequate disclosure of all material facts
4. To refrain from misleading clients
5. To expose all conflicts of interests to clients
Statement of financial position (balance sheet)
A snapshot of the financial situation as of the given date. It is a complete representation of
financial assets and liabilities. It is a statement of net worth
Assets are separated into these 3 categories
Cash/cash equivalents, invested assets, use assets
Liabilities:
include any debt of an individual, such as balances for mortgage loans, auto loans, and credit
cards. They are categorized as short term or long term
Cash flow statement:
reveals cash receipts and disbursements over a specific past period, usually 1 year. It
summarizes the inflows and outflows of cash, showing all sources of income and patterns of
spending, saving, and investing.
Benchmark for the front-end ratio
28%
