CFP Unit 1: General Financial Planning Principles,
Professional Conduct, and Regulation Test with all Correct
& 100% Verified Answers |Guaranteed to Pass
Financial Planning ✔Correct Answer-Is the process of determining whether and how an
individual can meet life goals through the proper management of financial resources
Financial Planning Process ✔Correct Answer-Allows a client to get a realistic overview of his
current financial status, set and analyze goals, develop a plan to meet these goals, and follow
the plan so that goals can be accomplished. Re-evaluating the plan periodically and monitoring
the clients progress are also important parts of the financial planning process
Financial Planning Engagement ✔Correct Answer-This exists when a CFP certificant performs
any type of mutually agreed-upon financial planning services for a client
Financial Planning Practitioner ✔Correct Answer-Is a person who engages in financial
planning using the financial planning process when working with a client
Step one of the financial planning process ✔Correct Answer-Establishing and defining the
client-planner relationship
Step two of the financial planning process ✔Correct Answer-Gathering information necessary
to fulfill the engagement
Step three of the financial planning process ✔Correct Answer-Analyzing and evaluating the
client's current financial status
Step four of the financial planning process ✔Correct Answer-Developing and communicating
the recommendations
Step five of the financial planning process ✔Correct Answer-Implementing the
recommendations
Step six of the financial planning process ✔Correct Answer-Monitoring the recommendations
A letter of engagement ✔Correct Answer-This defines the legal relationship between the
financial planner and the client. CFP Board requires that certain items be placed in writing
Quantitative data ✔Correct Answer-Are those data that are measurable or expressed as a
quantity or number. Examples include, current financial status, copies of wills and trusts, a list of
current investments
, Qualitative data ✔Correct Answer-Are those data that are concerned with the quality of a
clients life. This data often represents a clients feelings, opinions and attitudes.
Asset accumulation phase ✔Correct Answer-A client is usually in this phase until
approximately age 45 or later if the clients children are not yet independent. During this phase,
debt is usually high and cash flow and net worth are generally low
Conservation or protection phase ✔Correct Answer-A client is usually in the phase from
approximately age 45 to 60 or immediately preceding the clients planned retirement date.
Generally, cash flow and net worth are increasing and debt is decreasing
Distribution of gifting phase ✔Correct Answer-A client is usually in this phase from
approximately age 60, or the planned retirement date, until the date of death. Distribution
strategies, including retirement income sources and gifting strategies, are often a primary focus
of a clients estate planning
Behavioral Finance ✔Correct Answer-Is a relatively new field of study which related
behavioral and cognitive psychology to financial planning and economics in an attempt to
understand why people often act irrationally during the financial decision making process
Herd Mentality ✔Correct Answer-This is the tendency of individuals to follow the actions of a
larger group, whether rational or not. If people were making this decision individually, each
person would not necessarily make the same decision.
Anchoring ✔Correct Answer-This concept involves individuals making irrational decisions
based on information that should have no influence on the decisions at hand
Overconfidence ✔Correct Answer-Overconfidence investors often believe they can control
random events merely by acquiring more knowledge, and consider their abilities to be much
better than they actually are
Prospect theory ✔Correct Answer-Investors generally fear losses much more than they value
gains. Accordingly, they will most often choose the smaller of two potential gains if it avoids a
sure loss.
Confirmation bias ✔Correct Answer-People tend to pay more attention to information that
supports their preconceived opinions and poorly made decisions, while disregarding accurate,
unsupportive information
Mental accounting ✔Correct Answer-Also known as "money jar mentality", this concept
involves the tendency of individuals to put their money into separate "accounts" based on the
function of these accounts.
Professional Conduct, and Regulation Test with all Correct
& 100% Verified Answers |Guaranteed to Pass
Financial Planning ✔Correct Answer-Is the process of determining whether and how an
individual can meet life goals through the proper management of financial resources
Financial Planning Process ✔Correct Answer-Allows a client to get a realistic overview of his
current financial status, set and analyze goals, develop a plan to meet these goals, and follow
the plan so that goals can be accomplished. Re-evaluating the plan periodically and monitoring
the clients progress are also important parts of the financial planning process
Financial Planning Engagement ✔Correct Answer-This exists when a CFP certificant performs
any type of mutually agreed-upon financial planning services for a client
Financial Planning Practitioner ✔Correct Answer-Is a person who engages in financial
planning using the financial planning process when working with a client
Step one of the financial planning process ✔Correct Answer-Establishing and defining the
client-planner relationship
Step two of the financial planning process ✔Correct Answer-Gathering information necessary
to fulfill the engagement
Step three of the financial planning process ✔Correct Answer-Analyzing and evaluating the
client's current financial status
Step four of the financial planning process ✔Correct Answer-Developing and communicating
the recommendations
Step five of the financial planning process ✔Correct Answer-Implementing the
recommendations
Step six of the financial planning process ✔Correct Answer-Monitoring the recommendations
A letter of engagement ✔Correct Answer-This defines the legal relationship between the
financial planner and the client. CFP Board requires that certain items be placed in writing
Quantitative data ✔Correct Answer-Are those data that are measurable or expressed as a
quantity or number. Examples include, current financial status, copies of wills and trusts, a list of
current investments
, Qualitative data ✔Correct Answer-Are those data that are concerned with the quality of a
clients life. This data often represents a clients feelings, opinions and attitudes.
Asset accumulation phase ✔Correct Answer-A client is usually in this phase until
approximately age 45 or later if the clients children are not yet independent. During this phase,
debt is usually high and cash flow and net worth are generally low
Conservation or protection phase ✔Correct Answer-A client is usually in the phase from
approximately age 45 to 60 or immediately preceding the clients planned retirement date.
Generally, cash flow and net worth are increasing and debt is decreasing
Distribution of gifting phase ✔Correct Answer-A client is usually in this phase from
approximately age 60, or the planned retirement date, until the date of death. Distribution
strategies, including retirement income sources and gifting strategies, are often a primary focus
of a clients estate planning
Behavioral Finance ✔Correct Answer-Is a relatively new field of study which related
behavioral and cognitive psychology to financial planning and economics in an attempt to
understand why people often act irrationally during the financial decision making process
Herd Mentality ✔Correct Answer-This is the tendency of individuals to follow the actions of a
larger group, whether rational or not. If people were making this decision individually, each
person would not necessarily make the same decision.
Anchoring ✔Correct Answer-This concept involves individuals making irrational decisions
based on information that should have no influence on the decisions at hand
Overconfidence ✔Correct Answer-Overconfidence investors often believe they can control
random events merely by acquiring more knowledge, and consider their abilities to be much
better than they actually are
Prospect theory ✔Correct Answer-Investors generally fear losses much more than they value
gains. Accordingly, they will most often choose the smaller of two potential gains if it avoids a
sure loss.
Confirmation bias ✔Correct Answer-People tend to pay more attention to information that
supports their preconceived opinions and poorly made decisions, while disregarding accurate,
unsupportive information
Mental accounting ✔Correct Answer-Also known as "money jar mentality", this concept
involves the tendency of individuals to put their money into separate "accounts" based on the
function of these accounts.
