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1: Which is not a method of compensation in the financial planning field?

A. Commission only
B. Fee only
C. Percentage of assets
D. Payment in securities

Rationale :

Fee only: Generally thought to be the most objective, since there is no incentive for the
planner to recommend one product over another;
Commission only: Depends on the sale of specific products;
Fee plus commission: A combination of fee only and commission only. Often fees are
charged for planning services and commissions are paid for resulting product sales.
Salary: Generally restricted to institutions that provide financial planning in addition to
other services;
Percentage of assets: Charged as a fee for the percentage of assets under
management, which depend on the services provided. As fee transparency has become
a focus in the industry, this is becoming more common.

2: Canadians need to make sound financial planning decisions because:

A. Savings are at an all-time high, and thus, financial security is assured like never before.
B. The average person has the potential for a longer retirement, since life expectancy
is increasing.
C. There has been a drop in single-person households.
D. It is estimated that 85% to 90% of pre-retirement income will be needed to enjoy a
comparable lifestyle after retirement.

Rationale :

Emerging trends that give rise to the need for financial planning include:
Realities of retirement:
Canadians are living longer;

3: Privacy and safeguarding client information falls under which Principle of the Code of
Ethics for CFP professionals?

A. Integrity
B. Diligence
C. Confidentiality
D. Fairness
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Rationale :
Principle #6: Confidentiality

The confidentiality of all client information will be maintained and safeguarded.

4: Disclosing all existing or potential conflicts of interest to the client falls under which
Principle of the Code of Ethics for CFP professionals?

A. Integrity
B. Diligence
C. Confidentiality
D. Fairness

Rationale :
Principle #5: Fairness

Services will be provided in a manner that is fair and reasonable to clients, principals,
partners, and employers. Conflicts of interest in providing such services will be
disclosed.
Fairness is evident when the planner practises the golden rule: “Do unto others as you
would have them do unto you.”

5: Which specialist could offer the best advice on the tax impact of an investment vehicle?

A. An insurance agent
B. An investment advisor
C. An accountant
D. A lawyer

Rationale :
Accountants: Maintain financial records, prepare tax returns, and analyze tax consequences
arising from investments. They evaluate changing tax laws and recommend ways of taking
advantage of these changes.

6: Honesty and candour falls under which Principle of the Code of Ethics for CFP
professionals?

A. Integrity
B. Diligence
C. Confidentiality

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D. Fairness

Rationale :
Principle #2: Integrity

Integrity means that honesty and candour must not give way to personal gain or
advantage.

7: Who would be the best specialist to refer a client to for advice on property ownership?

A. An insurance agent
B. An investment advisor
C. An accountant
D. A lawyer

Rationale :
Lawyers: Provide expertise when dealing with estate planning, family and charitable trusts,
life insurance, and ownership of property and execute documents as required.

8: The need for intellectual honesty and impartiality falls under which Principle of the Code of
Ethics for CFP professionals?

A. Integrity
B. Objectivity
C. Confidentiality
D. Competence

Rationale :
Principle #3: Objectivity

Objectivity requires intellectual honesty and impartiality.

9: Continued commitment to professional improvement falls under which Principle of the

A. Integrity
B. Objectivity
C. Confidentiality
D. Competence

Rationale :
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Principle #4: Competence

The planner must have the necessary knowledge and skills to provide competent
service; they must also maintain their abilities and training.

10: The best party to offer advice on an estate's ability to pay for probate and other
administrative expenses in the event of death is a(n):

A. Insurance agent
B. Investment advisor
C. Accountant
D. Lawyer

Rationale :
Insurance agents:Provide products essential for risk management and asset protection,
including: Life insurance; Disability insurance; Property and Casualty insurance.

11: To whom should an advisor refer a client for advice on buying and selling securities?

A. Insurance agent
B. Investment advisor
C. Accountant
D. Lawyer

Rationale :
Investment Advisors:Assist in the creation and growth of a client’s assets by identifying
appropriate investment vehicles (e.g., stocks, bonds, mutual funds, annuities, etc.) and
developing a portfolio based on the client’s short and long-term financial goals.

12: If a financial advisor breaches their duty of care, who else may be held liable?

A. The client
B. The professional body
C. The advisor's employer
D. The person who recommended the advisor

Rationale :
If a financial advisor breaches their duty of care, their employer can also be held legally
liable.

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13: The requirement to provide services in a professional and timely manner falls under
which Principle of the Code of Ethics for CFP professionals?

A. Diligence
B. Professionalism
C. Confidentiality
D. Competence

Rationale :
Principle #7: Diligence

Diligence means providing prompt and thorough service.

14: To whom should an advisor refer a client for advice on estate protection?

A. Insurance agent
B. Investment advisor
C. Accountant
D. Lawyer

Rationale :
Insurance agents:Provide products essential for risk management and estate and asset
protection, including: Life insurance; Disability insurance; Property and Casualty insurance.

15: A consumer protection law that is enforced by imposing fines and penalties is which type
of law?

A. Private law
B. Consumer law
C. Public law
D. Protective law

Rationale :
Public laws that do not affect the legal relations between purchasers and providers directly;
they are enforced using fines, penalties, or licensing.

16: Identify the emerging trend giving rise to the need for financial planning.

A. Lower wages

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B. Expanding cities
C. Changing family dynamics
D. An aging population

Rationale :

Emerging trends that give rise to the need for financial planning include:
Changing family dynamics that require individuals to be financially independent
and not rely on family for care later in life.

17: Contractual issues are covered by which group of laws relating to consumer protection in
Canada?

A. Private law
B. Tort law
C. Public law
D. Statute law

Rationale :
Private laws that directly affect the legal relations between purchasers and providers. Private
laws are further classified as either contractual laws or non-contractual laws.

18: Which method of compensation for a financial planner is the least likely to exert influence
on the products they choose for their clients?

A. Commission only
B. Fee plus commission
C. Salary
D. Fee only

Rationale :
Fee only:Generally thought to be the most objective, since there is no incentive for the
planner to recommend one product over another;

19: Valerie informs her client that she can help him prepare his business's corporate income
tax return, even though she has no training as an accountant. Which Principle of the Code of
Ethics for CFP professionals is Valerie violating?

A. Client First
B. Integrity
C. Objectivity

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D. Competence

Rationale :
Principle #4: Competence
Competence also includes the ability to recognize that a financial planner has limits to their
knowledge. The planner will refer the client to other professionals (e.g., tax and/or estate
planning experts.) The planner must also maintain their knowledge and training.

20: Adam is an advisor who owns shares in the company his wife works for, RTY Inc. When a
new client tells him that she is interested in buying shares in RTY, Adam says it would be a
good investment decision. Which Principle of the Code of Ethics for CFP professionals is
Adam violating?

A. Fairness
B. Integrity
C. Objectivity
D. Competence

Rationale :
Principle #5: Fairness

Services will be provided in a manner that is fair and reasonable to clients, principals,
partners, and employers. Conflicts of interest in providing such services will be
disclosed.
Fairness is evident when the planner practises the golden rule: “Do unto others as you
would have them do unto you.”

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