TOOLS___TECHNIQUES_OF_FINANCIAL_PLANNING

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May 17, 2024

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BISN EXAM-TOOLS&TECHNIQUES OF FINANCIAL PLANNING Q&A 2022 Chapter 1 True or False: 1. One definition of financial planning is cash flow planning. 2. A good financial plan is one that shows the client how to achieve all his or her goals. Answers: 1. True 2. False: the client must prioritize, and may even have to sacrifice some goals to achieve others. Multiple Choice: 1.A good financial planning report must include an analysis of all of the following EXCEPT: a. Where you are now b. Where you want to be c. Why you failed previously d. How to reach your goals Answer: C TOOLS & TECHNIQUES OF FINANCIAL PLANNING 8th Edition College Course Materials Chapter 2 True or False: 1. Clients are best served by a financial planning team with expertise in different fields rather than a single advisor. 2. The authors suggest that risk/reward principles must include both economic and psychological considerations.

BISN EXAM-TOOLS&TECHNIQUES OF FINANCIAL PLANNING Q&A 2022 3. The truly professional advisor will continue his/her education though various means, including joining organizations such as FPA, NAPFA, etc. 4. Clients who have a chance to participate in the financial planning process are more likely to resent paying for the services of the advisors. Answers: 1. True 2. True 3.True 4. False TOOLS & TECHNIQUES OF FINANCIAL PLANNING 8th Edition College Course Materials Chapter 3 True or False: 1. According to the authors, financial planning is a process, not a product or service. 2. Clients have better chances of meeting their objectives if the objectives are realistic, welldefined and measurable. 3. The authors recommend prioritizing client goals as well as attaching a time frame to each goal. Answers: 1. True 2. True 3. True Multiple Choice: 1. The five steps in the financial management process outlined by the authors include the following EXCEPT: a. Establish goals b. Collect data c. Measure performance d. Establish living wills Answer:

BISN EXAM-TOOLS&TECHNIQUES OF FINANCIAL PLANNING Q&A 2022 1. d TOOLS & TECHNIQUES OF FINANCIAL PLANNING 8th Edition College Course Materials Chapter 4 True or False: 1. The financial planner must always assume the role of the quarterback of the financial planning team. 2. Clients who put return of principal above return on principal should only use risk-free investments. 3. Automatic investment plans are a more effective way to build wealth than discretionary investments as they allow clients to put aside money before they consider spending it. 4. The philosophy of “owning, not loaning” is the belief that fixed income investments are a better alternative to equities for building wealth. 5. “Multidimensional” diversification means diversifying across classes of investment vehicles, by geographic location, time, etc. 6. Dollar cost averaging injects discipline into the investment process. 7. The concept of a “discount” for federal estate taxes refers to the system of prepaying estate taxes. 8. The debt repayment is essentially a risk-free investment. Answers: 1. False 2. False: the statement does not imply total avoidance of risk. 3. True 4. False 5. True 6. True 7. False 8. True Multiple Choice: 1. Match the terms in column A with the description in column B. A B

BISN EXAM-TOOLS&TECHNIQUES OF FINANCIAL PLANNING Q&A 2022 a. Risk management 1. Boosts investment return by deferring taxes b. Marketability of borrowing 2. Earning rate of return greater than the cost c. Liquidity 3. Protecting ground gained without giving up much in return d. Tax leverage 4. Irrevocable life insurance trust e. Estate freeze 5. Ability to turn investment quickly into cash with little or no loss f. Estate tax-free wealth transfer 6. Ability to quickly dispose of an investment g. Leverage 7. Transfer asset growth to next generation Answer: 1. a : 3 b : 6 c : 5 d : 1 e : 7 f : 4 g : 2 TOOLS & TECHNIQUES OF FINANCIAL PLANNING 8th Edition College Course Materials Chapter 5 True or False: 1. A truly personalized financial plan must consider factors such as cultural background and family experiences of the client. 2. The financial planner must focus exclusively on the rational, rather than emotional aspects of the client’s goals and aspirations. 3. It is possible to assess a client’s attitudes about money based on a simple classification system, based on age, marital status, etc. 4. The financial planner must recognize that there is a strong relationship between stress and money. Answers: 1. True

BISN EXAM-TOOLS&TECHNIQUES OF FINANCIAL PLANNING Q&A 2022 2. False 3. False: such a system would be too simplistic. 4. True TOOLS & TECHNIQUES OF FINANCIAL PLANNING 8th Edition College Course Materials Chapter 6 True or False: 1. If you hold yourself out to the public as financial planner, you lose the exemption from registration even if you otherwise qualify. 2. A financial planner, who registered with the SEC as an investment advisor, decided to sell his practice and retire. He may assign all his clients to the buyer without obtaining the clients’ permission. 3. Investment advisor representatives must still register with the states in which they operate even if their firms are registered with the SEC. 4. The Act specifically forbids the use of testimonials in advertising by registered investment advisors. 5. An investment advisor is a fiduciary in the eyes of the SEC. 6. Part I of form ADV that is filed with the SEC is kept confidential, while part II is made available to the public at an SEC-sanctioned web site. 7. SEC-registered investment advisors must file audited financial statements with the SEC on an annual basis. True / False 8. Financial planners who advise clients who are residents of multiple states about insurance must obtain a national insurance license. 9. A financial planner who provides insurance advice for a fee may obtain a license as an insurance consultant in some states. Answers: 1. True 2. False 3. True 4. True 5. True 6. False 7. False 8. False: there is no national licensing for insurance

BISN EXAM-TOOLS&TECHNIQUES OF FINANCIAL PLANNING Q&A 2022 9. True Multiple Choice: 1. Which of the following is NOT part of the definition of an Investment Advisor as defined by the Investment Advisers Act of 1940 (the Act)? a. provides advice regarding securities b. is in the business of providing advice c. holds a CFP ® or series 7 license d. receives compensation for advice 2. The Act defines compensation as a. Commission only b. Fees only c. Receipt of any economic benefit d. 12(b) 1 fees only. 3. Which of the following is NOT exempt from the definition of an investment advisor? a. Publisher of the local newspaper, the Daily Beagle b. Insurance agent who advises clients about no load mutual funds c. Those who advise clients solely about U.S. treasury obligations d. Local attorney who occasionally advises clients about setting up investment accounts for their jury awards 4. The “brochure rule” requires that the investment adviser do which of the following? a. Provide the client with an audited financial statement of the adviser’s net worth. b. Deliver a written disclosure document (such as part II of form ADV) to each client c. Provide a copy of part I of form ADV to each client d. Provide clients with copies of the adviser’s marketing brochure. 5. The anti-fraud provisions of the Act applies to: a. All investment advisors, even those who are exempt from registration b. Only those who must register with the SEC or the states c. Only situations where security transactions take place. d. Only advisors of pension plans 6. Which of the following statements about the definition of “security” under the Investment Advisor Act is CORRECT? a. The act defines the term “security” in the broadest possible fashion b. The act defines the term narrowly, to include only stocks, bonds and

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