Question 1

In a personal financial planning engagement,a conflict of interest:&#10;A)Creates a need for client consent.&#10;B)Prohibits any objectivity.&#10;C)Results in termination of the engagement.&#10;D)Should not be disclosed to protect confidentiality.

Accepted Answer

A conflict of interest can arise when the planner's personal interests interfere with their professional judgment in serving the client to the best of their abilities. In such a scenario, the planner must disclose the conflict of interest to the client and seek their consent to proceed with the engagement. This ensures that the client is aware of any potential biases or limitations that may affect the planner's recommendations and can make an informed decision. Prohibiting objectivity, resulting in termination of the engagement, or not disclosing the conflict of interest to protect confidentiality are not appropriate responses in this situation.

Question 2

The construction of a dream home is an example of:&#10;A)Cash flow category.&#10;B)IRC Section 121.&#10;C)Life planning goal.&#10;D)Personal financial planning.

Accepted Answer

The construction of a dream home is an example of a life planning goal. It is a long-term aspiration that relates to an individual's personal and family preferences, rather than their financial objectives. While it may involve financial planning, it is not primarily driven by a need for financial security or the management of cash flow. Additionally, it is not specifically related to tax code or other legal regulations (such as IRC Section 121).

Question 3

How many steps are required in the PFP process?&#10;A)Two.&#10;B)Four.&#10;C)Seven.&#10;D)Eleven.

Accepted Answer

B

Question 4

A personal financial planning client expressing an attitude or a desire is an example of:&#10;A)Heuristics.&#10;B)Qualitative data.&#10;C)Quantitative Data.&#10;D)Socratic Questioning.

Accepted Answer

A client expressing an attitude or a desire falls under qualitative data as it cannot be quantified numerically. Heuristics are mental shortcuts used for decision making, quantitative data involves numerical measurements, and Socratic questioning is a method of questioning used to stimulate critical thinking and reflect on one's beliefs.

Question 5

An implementation engagement should include all of the following except:&#10;A)Description of limitations on the work performed.&#10;B)Frequency and time period of measuring the client's progress toward reaching the stated goals.&#10;C)Summary of recommended actions to be taken.&#10;D)Summary of the planning decisions being implemented.

Accepted Answer

The frequency and time period of measuring the client's progress is not typically included in an implementation engagement, as it focuses on the execution of plans rather than ongoing measurement.

Question 6

Which of the following is not required for the disclosure of compensation?&#10;A)Amount of compensation.&#10;B)Method of compensation,except for the impact of indirect compensation.&#10;C)Noncash benefits,received by the member for referrals to other providers&#10;D)Time period of which compensation will be received.

Accepted Answer

The method of compensation, except for the impact of indirect compensation, is not a required disclosure. However, the other options - amount of compensation, noncash benefits received for referrals, and time period of compensation - are all required disclosures.

Question 7

Which of the following is not a personal financial planning service?&#10;A)Charitable planning.&#10;B)Elder planning.&#10;C)Retirement planning.&#10;D)Income tax preparation.

Accepted Answer

Income tax preparation is typically considered a tax service rather than a personal financial planning service. Financial planning focuses on long-term strategies for managing finances, including investments, savings, budgeting, and planning for life events, whereas tax preparation is specifically about accurately reporting past financial activities to tax authorities.

Question 8

All of the following are types of Additional Engagements except:&#10;A)Discovery engagement.&#10;B)Implementation engagement.&#10;C)Monitoring engagement.&#10;D)Updating engagement.

Accepted Answer

The answer of All of the following are types of...

Deck 1: Personal Financial Planning