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FP1 FULL PRACTICE EXAM|80 QUESTIONS WITH COMPLETE ANSWERS|VERIFIED
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FP1 FULL PRACTICE EXAM|80 QUESTIONS WITH COMPLETE ANSWERS|VERIFIED
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FP1 FULL PRACTICE EXAM|80 QUESTIONSWITH COMPLETE ANSWERS|VERIFIED
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.
-By and large, what statement below is true in regards to the current
landscape 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
inexpensive 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
-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.
,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.
-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.
-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.
-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 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.
, -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.
-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
-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 responsibility is he demonstrating?
A. Integrity.
B. Professionalism.
C. Confidentiality.
D. Diligence. - -C. Confidentiality.
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