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FP1 FULL PRACTICE EXAM 1. Which statement regarding the traits or values of financial advisors is correct? A. Professionalism is displayed by being competent and knowledgeable. B. Diligence is displayed by being honest with clients. C. Objectivity require£11.76
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FP1 FULL PRACTICE EXAM 1. Which statement regarding the traits or values of financial advisors is correct? A. Professionalism is displayed by being competent and knowledgeable. B. Diligence is displayed by being honest with clients. C. Objectivity require
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Module
FP1
Institution
FP1
FP1 FULL PRACTICE EXAM
1. Which statement regarding the traits or values of financial advisors is
correct?
A. Professionalism is displayed by being competent and knowledgeable.
B. Diligence is displayed by being honest with clients.
C. Objectivity requires respecting clients' privacy
1. Which statement regarding the traits or values of financial advisors is correct?
A. Professionalism is displayed by being competent and knowledgeable.
B. Diligence is displayed by being honest with clients.
C. Objectivity requires respecting clients' privacy.
D. Confidentiality requires the advisor to make impartial recommendations.: A. Professionalism is displayed by being
competent and knowledgeable.
Professionalism is displayed by being competent and knowledgeable by keeping up to date regarding key aspects of
the financial services industry.
2. By and large, what statement below is true in regards to the current land- scape in Canada for financial advisors?
A. There has been a dramatic shift to fee based advice as it's perceived as unbiased.
B. The role has shifted to a client driven model where building a strong client relationship is key.
C. The business is now product driven where it's all about selling higher commissioned products.
D. The industry is focusing on reducing costs and finding the most inexpen- sive investments for clients.: B. The role
has shifted to a client driven model where building a strong client relationship is key.
The role of the Advisor in the financial services industry has changed in recent years from one that is product driven to
one that is client driven. Reference: Module 1, Section 1
3. Which statements about the evolution of the role of financial advisors is/are correct?
[I] The financial services industry has moved towards an integrated market and so have advisors.
[II] Advisors have fewer products and services to offer to clients.
[III] Advisors require a greater level of knowledge to recommend sophisticated alternatives to clients.
A. I only.
B. I and III only.
C. II and III only.
, FP1 FULL PRACTICE EXAM
D. I and II only.: B. I and III only.
Advisors have to work within a highly integrated financial services market and must possess a much higher level of
knowledge than before to satisfy increasingly sophisticated clients.
4. Select the first step in the financial planning process.
A. Analyzing a client's data and information.
B. Recommending strategies to meet goals.
C. Establishing a relationship with the client.
D. Collecting a client's data and information.: C. Establishing a relationship with the client.
The first step in the financial planning process is for an advisor to establish a relationship with the client; everything else
follows.
5. Select the item that would provide you with quantitative data about your new client.
A. Profit sharing plan statement.
B. Risk tolerance assessment.
C. Goal setting questionnaire.
D. Fees and services agreement.: A. Profit sharing plan statement.
Only the profit-sharing statement would provide you with quantitative data, i.e. numeric or other specific data that can be
quantified. The other options would provide qualitative data. Reference: Module 1, Section 2.
6. Your client's goal is to improve her cash flow. Select the strategy that will be most effective in helping her to reach
her goal.
A. Improve investment return.
B. Reduce flexible expenses and lengthen time frame for investments.
C. Increase income and reduce expenses.
D. Contribute regularly to an emergency fund.: C. Increase income and reduce expenses.
Cash flow is the amount of money available for investment or other purposes. In this scenario, the client is best able to
free up money for investments by increasing the amount of money coming in (income) and reducing the amount of
money going
, FP1 FULL PRACTICE EXAM
out (expenses). While (b) would improve cash flow by reducing some expenses, the addition of the increase in income
in (c) makes it more effective.
7. Kim does not recommend an investment fund to her clients that is heavily promoted by her own firm's marketing
department because her analysis demonstrates that it is not consistent for her clients' goals. Select the type of
responsibility that she is demonstrating.
A. Integrity.
B. Professionalism.
C. Objectivity.
D. Diligence.: C. Objectivity.
Kim is fulfilling the responsibility of "Objectivity" which states that an adviser must not make recommendations that
benefit the adviser or the adviser's institution when there are other products and services that might serve an adviser's
clients better.
Reference: Module 1, Section 2.
8. Select the most useful goal for setting investment priorities.
A. "I'm not sure when we'll retire, but we want to be able to travel for 10 or so years at that time."
B. "We want to buy a big house in a nice neighbourhood"
C. "We will need 70% of our current income level to retire and maintain our lifestyle."
D. "I want to be able to retire comfortably based on my current lifestyle.": C. "We will need 70% of our current income
level to retire and maintain our lifestyle."
General Feedback:
Options a, b, and d are not measurable or quantifiable; only c is measurable and quantifiable. Thus, only "c" is usual
for setting priorities. Encouraging clients to set specific, measurable targets instead of vague and general goals
serves two functions:
It helps to clearly and explicitly define financial objectives.
It helps to measure and monitor the performance of the financial plan. Reference: Module 1, Section 2
9. Nabila, an advisor, receives a call from an insurance broker asking for information about the assets she manages for
a client. Nabila refuses to speak to the broker about her client without the client's permission. What type of
, FP1 FULL PRACTICE EXAM
responsibility is he demonstrating?
A. Integrity.
B. Professionalism.
C. Confidentiality.
D. Diligence.: C. Confidentiality.
General Feedback: Nabila is fulfilling the responsibility of Confidentiality, which states that an adviser must respect a
clients' privacy and treat their information with confidentiality. Reference: Module 1, Section 2.
10. Haseeb is an advisor who regularly attends industry seminars and takes continuing education courses. What
type of responsibility is he demonstrat- ing?
A. Integrity.
B. Professionalism.
C. Objectivity.
D. Diligence.: B. Professionalism.
Haseeb is demonstrating the responsibility of professionalism, which states that an advisor must be competent
knowledgeable and up to date regarding all aspects of the financial services industry. Reference: Module 1, Section 2.
11. Which statement best describes an efficient financial plan?
A. A plan that delivers the desired results.
B. A plan that uses a balanced approach to selecting investments.
C. A plan that generates optimal results for the least amount of money.
D. A plan that incurs the highest rates of return for the least amount of risk.: C. A plan that generates optimal results for
the least amount of money.
An efficient plan produces the best results for the least money, while an effective plan produces the desired results.
Reference: Module 1, Section 2.
12. Determining a client's risk tolerance, "dreams and desires" are all exam- ples of an advisor collecting what type
of data?
A. Emotional data.
B. Qualitative data.
C. Bottom- up data.
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