Test Bank Questions, Web Chapter D
1. In which of the following areas does a financial planner not have to be
knowledgeable?
a. Taxes
b. Investments.
c. Current living needs.
d. A financial planner has to be knowledgeable in all of the above
e. A financial planner does not have to be knowledgeable in any of the above
2. Why is a career in personal finance planning personally awarding?
a. Because of the opportunity most financial planners have to work as an executive
in a large financial institution
b. Because financial planners can make a difference in people’s lives
c. Because of the recognition a financial planner receives for performing a valuable
service
d. All of the above
e. Both b and c
3. What is an initial business plan?
a. An outline or detailed description of how you expect to establish and grow your
firm over the next one to five years
b. An outline or detailed description of how you expect to establish and grow your
firm over the next year
c. An outline or detailed description of how you expect to establish and grow and
eventually sell your firm
d. An outline or detailed description of how you intend to raise the capital required
to start a firm
e. None of the above
4. Which of the following is not a step in a financial planner’s initial business plan?
a. Obtain proper education and experience
b. Secure the capital required to purchase a financial planning business
c. Develop a mission statement
d. Establish the services and structure of the firm
e. All of the above are steps
5. Which of the following is not a requirement that all financial planners should meet?
a. An undergraduate degree
b. A completed specialization in investment management
c. A planning designation
d. Practical professional experience in planning
e. All of the above are requirements
6. The CFP® certification requires which of the following?
a. A graduate degree
b. A minimum of a six-course 15-credit curriculum
c. Passing a comprehensive exam
d. All of the above
e. None of the above
7. Which of the following designations is often acquired by people with insurance
backgrounds?
a. ChFC
b. PFS
c. CFA
d. CFP
e. None of the above
8. Which of the following advisors ensures that you stay on the right side of regulation?
a. Accountant.
b. Attorney.
c. Mentor.
d. Regulator.
e. None of the above.
9. A mission statement:
a. Provides the rationale for establishing your business or career
b. Helps the planner keep their focus
c. Satisfies regulation requiring such a statement
d. Both a and b
e. Both b and c
10. A mission statement:
a. Is typically several paragraphs long
b. Is typically several pages long
c. Is typically no more than a paragraph long
d. Is typically no more than a sentence long
e. None of the above
11. Which of the following is not an example of a multiservice entity that offers financial
planning?
a. Insurance firms
b. Stock brokerage firms
c. Investment management firms
d. All of the above are examples
e. None of the above is an example
12. When can a subchapter S corporation serve a financial planner well?
a. When the planner expects an operating gain in the beginning and does not have
yearly income from other sources
b. When the planner expects an operating loss in the beginning and has yearly
income from other sources
c. When the planner expects an operating gain in the beginning and has yearly
income from other sources
d. When the planner expects an operating loss in the beginning and does not have
yearly income from other sources
e. None of the above
13. Which of the following receives all of their revenues from clients?
a. Fee-only planners.
b. Commission-only planners.
c. Fee and commission planners.
d. All of the above.
e. None of the above.
14. Which of the following explains why many commission-only and fee and
commission planners like their affiliation with broker dealers?
a. It allows planners to reduce their due diligence on products
b. It allows planner to pare their record keeping responsibilities
c. It permits planners them to spend more time performing financial planning
d. Both a and b
e. All of the above
Answer: e
15. The startup time for a new business is often shorter for
a. Commission-only and fee and commission planners
b. A planner that is more capable in marketing
c. Fee-only planners
d. Both a and b
e. Both b and c
16. Which of the following statements is accurate?
a. Demand for fee-only advice has been growing steadily over the past decade due
to its perceived attraction by consumers
b. At present, most financial advisors call themselves fee-only financial planners
c. Many people believe fee-only advice will decline in popularity
d. All of the above
e. None of the above.
17. The clients’ opinion of the planner may depend on:
a. The cost of the products offered by the broker-dealer.
b. The services of the products offered by the broker-dealer.
c. The overall quality of the broker-dealer.
d. All of the above.
e. None of the above
18. What are policy statements?
a. A sophisticated mission statement
b. The rationale for establishing the business
c. The practices that a firm has in attempting to fulfill client engagements and in
operating its business in general
d. Both a and b
e. Both b and c
Answer: c
19. Which of the following is not a common service that the financial planner may
provide in addition to a comprehensive financial plan?
a. An investment review
b. A retirement plan
c. A tax plan
d. An educational plan
e. An estate plan
20. Investment management software can be helpful in:
a. Determining overall asset allocation.
b. Making individual security decisions.
c. Satisfying regulatory requirements.
d. Both a and b.
e. Both b and c.
21. What does the acronym “CRM” stand when used in the expression “CRM software”?
a. Customer relationship management
b. Customer review management
c. Certified relationship management
d. Certified review management
e. None of the above
22. A variety of surveys on client satisfaction find that:
a. Many clients place more weight on personal relationships with their financial
advisors than they do on relative performance
b. Many clients place as much weight on personal relationships with their financial
advisors as they do on relative performance
c. Many clients place less weight on personal relationships with their financial
advisors than they do on relative performance
d. Many clients place more weight on business relationships with their financial
advisors than they do on relative performance
e. None of the above
23. Why should a financial planner volunteer for service in the community?
a. It can increase recognition of your name
b. It can enhance your reputation
c. It put you in contact with potential clients
d. Both b and c
e. All of the above
24. In many cases nothing can help your business more than:
a. Satisfied clients
b. Strong attorney advice when preparing marketing material
c. A strong academic background
d. Both a and b
e. Both b and c
25. Why are other planners a potential significant source of referrals?
a. Those from other cities may refer to you when clients move
b. Planners in your city may find that certain clients are too small
c. Because other planner can typically provide key personal information about the
individual that they refer
d. Both a and b
e. Both b and c
26. Which of the following is a planning organization?
a. The Personal Financial Planning Association
b. The National Financial Planning Association
c. The National Association of Personal Financial Advisors
d. Both a and b
e. Both b and c
27. Which of the following is an area in which financial planners may specialize?
a. Income strata
b. Profession
c. Products offered
d. All of the above
e. Both a and b
28. Cold calling is generally most prevalent with:
a. Product oriented fee-only planners
b. Product oriented commission-only planners
c. Product oriented fee and commission planners
d. Both a and b
e. Both b and c
29. What is an engagement letter?
a. A legal contract that details the understanding between the planner and the client
b. A informal letter inviting the client to a seminar
c. A letter formalizing the relation between the financial planner and the broker-
dealer
d. A letter that details the firm’s mission statement, which must be sent to every new
client
e. None of the above
30. Please provide an example of explanations for of each of the following parts of a
policy statement for an investment review:
a. Goal
b. Scope
c. Type of Analysis
d. Type of Securities Used
e. Output
f. Ethical/Regulatory Principles
