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FP511 Practice Exam Questions With
Verified Answers
Which of the following activities would be appropriate if you were establishing and defining the
client-planner relationship or gathering information necessary to fulfill the engagement?
1 Collecting personal financial information
2 Inquiring about the number of dependents
3 Inquiring about the age or dates of birth of dependents
4 Determining which stocks to purchase for the client's investment portfolio - answer✔1-3
Establishing and defining the client-planner relationship does not include determining which
stocks or investments to purchase. This occurs in the fourth phase of the financial planning
process, developing the recommendations.
Which of the following CFP® certificants would likely be considered to be engaged in financial
planning or the material elements of financial planning?
1 Lance, who reviews a life insurance sales brochure with his client, Arthur, and completes a
variable life insurance application
2 Nadia, who conducts comprehensive data gathering regarding Jason's investments, life
insurance, retirement plans, wills, and trusts and makes recommendations for him - answer✔2
Because Nadia's services involve several of the financial planning subject areas and she is
involved in the elements of financial planning, she is likely providing financial planning. Lance's
service to Arthur is limited, and the engagement would likely not be considered financial
planning.
According to CFP Board Code of Ethics, Connor, a CFP® professional, is responsible for which
of the following?
1 Acting in the client's best interests
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2 Avoiding or disclosing and managing conflicts of interest
3 Acting with honesty, integrity, competence, and diligence
4 Maintaining the confidentiality and protect the privacy of client information - answer✔All
CFP® professional must
Act with honesty, integrity, competence, and diligence.
Act in the client's best interests.
Exercise due care.
Avoid or disclose and manage conflicts of interest.
Maintain the confidentiality and protect the privacy of client information.
Act in a manner that reflects positively on the financial planning profession and CFP®
certification.
Amanda, a CFP® professional, is enjoying an afternoon at her son's school playground when she
is approached by Tracy, a fellow parent and teacher at a local elementary school. Their
conversation covers specifics about Tracy's personal and financial situation, with emphasis on a
recommended investment strategy for her 403(b) account. Amanda is aware that she is providing
Financial Advice to Tracy. Identify the correct application of rules from the Code and Standards
based on Amanda and Tracy's interaction. - answer✔Although only Financial Advice has been
determined, Amanda must uphold her Fiduciary Duty and must follow the Code of Ethics.
As a CFP® professional, Amanda is obligated to uphold the Code of Ethics. In addition, since
Financial Advice is occurring, Amanda must act as a Fiduciary, in the best interest of Tracy. The
introduction of the Code and Standards specifically states "The Code of Ethics applies at all
times, and sets forth principles that guide the behavior of CFP® professionals, with elaboration
provided in the Standards."
Bill and Sophia have recently retired and want to travel to Europe and then volunteer for local
mission work. They would also like to meet with Humphrey, their financial planner, to discuss
charitable contributions they would like to make to these local missions. Humphrey should
determine Bill and Sophia's life cycle phase to be - answer✔the distribution phase.
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The distribution/gifting phase begins subtly when a couple realizes that they can afford to spend
on things they never believed possible. The asset accumulation and conservation/protection
phases make this phase possible. For many people, there is a period when they are being
influenced by all three phases simultaneously, though not necessarily to the same degree.
Whitney is designing her new email template which will reflect her recent certification as a
CFP® professional. Under her name, she has identified herself as a CFP™. In a tagline at the
bottom of the template, she advertises herself as a "CFP® expert." According to CFP Board's
guidelines regarding how the CFP®" marks may be used, which of the following is CORRECT?
1 Whitney has appropriately identified herself as a CFP™.
2 Advertising herself as a CFP® expert is prohibited by CFP Board. - answer✔2
Although, Whitney can identify herself as a CFP®, it must be done behind her name, not under
it. If Whitney wants to identify herself under her name, she should do so as a ™. Statement II is
correct. "CFP®" must always be used with one of CFP Board's approved nouns ("certificant",
"professional", "practitioner", "certification", "mark", or "exam") unless directly following the
name of the individual certified by CFP Board. Here, it can be used alone.
Maxine, age 57, would like to retire in 10 years. Currently, her debt is decreasing as her cash
flow and net worth are steadily increasing. Based on Maxine's current financial life cycle phase,
which of the following goals is she likely to have? - answer✔Long-term goals, such as investing
for retirement
Maxine is in the conservation/protection phase of the financial life cycle. As such, her goals are
likely longer-term goals, such as investing to provide for future retirement income. In the
accumulation phase of the financial life cycle, clients have only limited discretionary income
and, as a result, they are likely to focus on short-term, cost-of-living goals. Finally, in the
distribution/gifting phase, estate planning and capital preservation are usually most important.
Blanca, a CFP® professional, has recently entered into a financial planning engagement with
Simon. As his financial planner, which of the following are Blanca's roles?
1 Analyzing Simon's current financial status
2 Assisting Simon in implementing the financial plan
3 Helping Simon identify financial goals and objectives - answer✔all
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The financial planner is responsible for analyzing clients' financial status, assisting clients in
implementing their financial plans, and making recommendations based on the client's goals and
objectives.
*** Candice has referred Rochelle, a CFP® professional, to her brother, Nelson. In their initial
meeting, Rochelle explains how she can help Nelson develop a comprehensive financial plan.
Which of the following would be Rochelle's roles in a client-planner relationship with Nelson?
1 Assisting Nelson in identifying his goals
2 Analyzing Nelson's current financial status
3 Recommending strategies that will meet Nelson's business goals
4 Providing documentation Rochelle needs to complete the financial plan - answer✔1,2,3
Rochelle is responsible for helping Nelson with identifying his goals and making
recommendations based on those goals. She is also responsible for analyzing Nelson's current
financial status. Nelson has the duty to provide documentation Rochelle needs to complete the
financial plan.
In 2012, the average cost of a new home in Oakville was $150,000. In 2014 the average cost rose
to $210,000. Due to an economic downturn in 2017, the average cost of a new home fell to
$185,000, and the reaction to the decreased cost was positive, even though the new average cost
was higher than the 2012 average cost of a new home. This behavior is known as -
answer✔anchoring.
When the average cost of a new home rose in 2014 to $210,000, home buyers reset their
psychological anchors to that cost. As the price declined in 2017 to $185,000, the reaction was
positive because it was considered in light of the higher 2014 price.
*** Recently, Fallon, an avid shopper, has heard from her friends that an investment in Shoes-2-
You stock was a wise idea because the shoes sold are very stylish. Even though Fallon's financial
planner has advised her that investing in this stock is a poor decision, she invests in it anyway.
Her brother, Stanley, congratulates her on her investment because he feels it is a wise
investment. Stanley considers himself to be an expert in investments. Unfortunately, he considers
his expertise to be much greater than it actually is. In the past, Stanley has taken credit for any
investment decisions that have positive returns but blames the economy when an investment
does poorly. Considering Fallon's and Stanley's behavior, which of the following statements is
