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CFP PRACTICE EXAM PAPER WITH SOLUTIONS 2024/2025
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CFP PRACTICE EXAM PAPER WITH SOLUTIONS 2024/2025
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CFP PRACTICE EXAM PAPER WITHSOLUTIONS 2024/2025
A CFP® certificant serves on the Board of a Shelter for Battered Women. A client would like to make a
substantial donation to the shelter and asks the CFP® certificant for advice concerning the gift. Is there a
conflict of interest for the CFP® certificant in advising the client on the gift?
A. Yes, there is a conflict, and the CFP® certificant must withdraw from the Board.
B. Yes, there is a conflict, and the CFP® certificant must withdraw from advising the client concerning the
gift.
C Answer: Solution: The correct answer is C.
There does not appear to be any conflict of interest in the CFP® certificant's roles of advising the client
and serving as a member of the Board for the Shelter for Battered Women. The CFP® certificant does not
materially benefit from the service on the Board, and the position does not seem likely to affect the
relationship with the client or to affect the CFP® certificant's advice concerning a gift. In order to avoid
any appearance of misleading the client, however, the CFP® certificant should disclose the position on
the Board of the shelter.
A CFP® professional has been engaged by a client to help with budgeting and investing for retirement.
The client has had difficulty saving money for investments even though he has an adequate income. The
CFP® professional began to collect information on income and expenses for the client and then decided
to look at the client's income tax returns. When the CFP® professional asked for income tax returns, he
learned that the client had not paid income taxes for the past 4 years. What should the Answer:
Solution: The correct answer is A.
The CFP® professional should refer the client to a CPA who will have experience and expertise with
handling income tax problems such as non-payment of the tax. The principle of Competence includes
"the wisdom to recognize the limitations of that knowledge and when consultation with other
professionals is appropriate or referral to other professionals necessary. "The CFP® professional should
not contact the IRS at this time because the client has not authorized such contact. Working on a budget
or payment schedule is also premature because the amount owed has not been determined. The
,planner will not be able to work on the budget and cash flow until the additional information regarding
the amount of taxes and penalties is determined.
A prospective client has contacted a CFP® certificant for investment advice. The prospective client asks
for a recommendation for a six-figure investment that will not require reporting to the IRS and that can
be purchased for cash. The client offers to pay all fees up-front and in cash, but she declines to provide
any financial statements or other information. The client does not want to have complete planning; she
only wants a recommendation for one investment. Which of the following actions Answer: Solution:
The correct answer is A.
The CFP® certificant cannot report the prospective client to the IRS or any other authority because there
has been no wrongdoing yet. The proposed arrangement is impermissible for a CFP® certificant, so the
relationship should be declined. The CFP® certificant cannot advise the client of suitable investments,
without financial information. The CFP® certificant should not accept employment that will place him or
her in such a dangerous situation. A waiver would not really help much and may show that the CFP®
certificant was aware of the potential for problems and, nevertheless, accepted the risk.
Sheila Brisbane, CFP® recently underwent a hearing conducted by the Disciplinary and Ethics
Commission in which the sanction is a Public Letter of Admonition. Under the Disciplinary Rules and
Procedures, which of the following is correct?
A. Sheila may appeal the decision of the DEC within 30 days after notice is sent.
B. The certificant's appeal must be filed in a court of competent jurisdiction, generally within her home
state.
C. The letter of admonition can be made public only in Sheil Answer: Solution: The correct answer is
A.
In Article 15 of CFP Board Procedural Rules, the certificant may make an appeal within 30 days. CFP
Board is the relevant party to which the appeal is made, not a court. Public letters are not limited to the
certificant's home town newspaper.
Under the Candidate Fitness Standards, if a person who wants to achieve CFP® certification has been
convicted of embezzlement, which of the following is correct?
,A. If the conviction was more than 10 years prior to the application for CFP® certification, the candidate
may become certified.
B. The candidate is permanently barred from certification.
C. Certification is possible, but may be delayed for as long as the jail or prison time served.
D. The candidate can achieve CFP® certification Answer: Solution: The correct answer is B.
In this case, the rules are clear: the candidate is permanently barred from certification. The time period
expired since the conviction is immaterial. Delay of certification for jail time is not possible; double
jeopardy does not apply because this relates to a certification body; and an appeal is not allowed.
In rare instances that a conviction is overturned, the individual could appeal to CFP Board.
Joseph Polasky, CFP® was the subject of a FINRA hearing in which he was cited for failure to become
properly registered in an adjacent state prior to soliciting investment business. No fines or suspensions
were imposed, but Joseph's FINRA record (his U-4) showed the infraction. CFP Board discovered the
notation on Joseph's record in a routine investigation, and sent Joseph official notice of its investigation.
Under the Disciplinary Rules and Procedures, which of the following is correct?
A. C Answer: Solution: The correct answer is B.
In Article 1 (1.1), the certificant must acknowledge the Notice of Investigation within 30 calendar days. If
CFP Board does not receive acknowledgment, another notice will be sent out and acknowledged within
14 calendar days. If no answer is received, the CFP Board may deliver a Notice of Failure to Cooperate
(Article 1.3). CFP Board has jurisdiction in that the certificant has agreed to abide by the Standards of
Conduct. The FINRA action does not warrant an automatic suspension, but in some cases, conduct may
warrant an Interim Suspension if serious. CFP Board does not issue fines.
Harry Kunz who is 45 and his wife Barbara who is 43 have been married for 15 years and have one child
age 12. The Kunzes obtained a comprehensive financial plan two years ago and have returned for their
, annual review. As in the previous annual review, they handed the CFP® professional a file of documents
with reports from their brokerage accounts and other investments and retirement plans. They then
advised the CFP® professional that they were planning to separate and to obtain a divorce. What
Answer: Solution: The correct answer is A.
The CFP® professional needs to discuss with the clients whether he or she can continue to provide
financial planning services to the Kunzes together or individually. The change in their circumstances
needs to be documented, and their agreement to proceeding as before or under different arrangements
needs to be resolved. There may be conflicts of interest that need to be identified and resolved. The
review and any financial planning services should await the documentation of the engagement that will
be put in place. Then the CFP® professional can inquire concerning any changes in their goals and
priorities.
Sam and Marsha Carter are 35 years of age and have two children. A CFP® professional has prepared a
financial plan for the family including education planning for the children. The Carters have begun to
implement the recommendations from the plan about 3 months ago. Marsha called today to say that
they have learned that their youngest child who is one year old is autistic. They would like to meet to
discuss their financial planning for this child. What should the CFP® professional do first at Answer:
Solution: The correct answer is D.
The CFP® professional will need to discuss whether he has the knowledge and skills required for
planning for the circumstances of an autistic child.
A CFP® professional works for a small RIA that prepares financial plans for a flat fee with commissions
received for investment products if the financial plan is implemented. Rasi Bachchan who is 30 years of
age and a young entrepreneur recently met with the CFP® professional for the first time to discuss
financial planning. Rasi would like to invest in some growth stocks and states that he is an aggressive
investor. The CFP® professional inquired about Rasi's financial situation, including a Answer:
Solution: The correct answer is A.
In establishing the client-planner relationship, the CFP® professional needs to identify and resolve
apparent and potential conflicts of interest. The disclosures should be presented and resolved before
the planner undertakes the data gathering step. The recommendation of an emergency fund needs to
await the data gathering and analysis of the client's situation. The conflict of interest must be disclosed
before the CFP® professional can proceed with investment recommendations. This is a secondary
disclosure as the investments that are being presented would not have been known at the onset of the
engagement.
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