Cwmc Module 13: Financial Advisors Competency Test

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Module Quizzes & Trivia

This quiz is part of LFEInstitute's CWMC (Certified Workplace Money Coaching) course. It willtest yourproficiency in the Financial Advisors Module (Module 13) of theprogram. The questions are allmultiple choice, and are designed to be a review of this Module. LetLFE knowwhen you've successfully completed this test and are ready to begin thenext Module.

Correct answers required for passing grade: 14/17


Questions and Answers
  • 1. 

    Which questions should be asked of a financial advisor to ensure he/she is a quality advisor? (check all that apply)

    • A.

      What credentials do you have and what do those credentials mean?

    • B.

      What is your religion?

    • C.

      How are you compensated?

    • D.

      Will you provide references that I can contact and talk to?

    • E.

      Do you validate parking?

    Correct Answer(s)
    A. What credentials do you have and what do those credentials mean?
    C. How are you compensated?
    D. Will you provide references that I can contact and talk to?
    Explanation
    The correct answer is: What credentials do you have and what do those credentials mean?, How are you compensated?, Will you provide references that I can contact and talk to?

    These questions are important to ask a financial advisor in order to determine their qualifications, how they are paid, and to verify their credibility. Asking about their credentials helps to understand their expertise and knowledge in the field. Inquiring about their compensation ensures transparency and helps to avoid any conflicts of interest. Requesting references allows for further validation of their track record and reputation.

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  • 2. 

    Which question should an expert financial advisor NOT ask a potential client?

    • A.

      When do you plan to retire?

    • B.

      What advisor or company do your friends use?

    • C.

      Does your employer offer a 401(k)?

    • D.

      What is your risk tolerance?

    • E.

      What are your retirement plans, goals and needs?

    Correct Answer
    B. What advisor or company do your friends use?
    Explanation
    An expert financial advisor should not ask a potential client about the advisor or company their friends use because it is irrelevant to the client's financial situation and needs. The advisor's focus should be on understanding the client's retirement plans, goals, needs, risk tolerance, and any available retirement options such as a 401(k). Asking about the client's friends' advisor or company does not provide any valuable information for the advisor to provide appropriate financial advice.

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  • 3. 

    What do the credentials "CFP" mean in the context of this CWMC Module?

    • A.

      Choose a Financial Planner

    • B.

      Concealed Firearms Permit

    • C.

      Certified Financial Planner

    • D.

      Consumer Financial Planning

    • E.

      Corporate Financial Plan

    Correct Answer
    C. Certified Financial Planner
    Explanation
    The credentials "CFP" refer to the designation of Certified Financial Planner. This certification is awarded to individuals who have completed the necessary education, passed a rigorous examination, and have met the experience requirements in the field of financial planning. It signifies that the person has a comprehensive knowledge of financial planning principles, ethics, and professionalism, and is capable of providing competent and ethical financial planning advice to clients.

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  • 4. 

    Which of the following Web sites are possible recommendations to someone who is preparing to work with a financial advisor? (check all that apply)

    • A.

      Www.bloomberg.com/invest/calculators/retire.html

    • B.

      Www.garrettplanningnetwork.com

    • C.

      Www.napfa.org

    • D.

      Www.adviserinfo.sec.gov

    • E.

      None of the above

    Correct Answer(s)
    A. Www.bloomberg.com/invest/calculators/retire.html
    B. Www.garrettplanningnetwork.com
    C. Www.napfa.org
    D. Www.adviserinfo.sec.gov
    Explanation
    The given answer includes all of the websites mentioned in the question. These websites are possible recommendations for someone preparing to work with a financial advisor as they provide resources and information related to financial planning, retirement calculators, and directories of registered financial advisors.

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  • 5. 

    Which of the following is NOT trained in financial services?

    • A.

      EAP advisor

    • B.

      Insurance agent

    • C.

      Mortgage lender

    • D.

      Tax attorney

    • E.

      None of the above; they are all trained in financial services.

    Correct Answer
    A. EAP advisor
    Explanation
    An EAP advisor is not trained in financial services. EAP stands for Employee Assistance Program, which is a work-based intervention program designed to assist employees in resolving personal problems that may affect their job performance. While EAP advisors provide support and guidance to employees, their training is focused on counseling and mental health support rather than financial services. On the other hand, insurance agents, mortgage lenders, and tax attorneys all require specific training and knowledge in financial services to perform their roles effectively. Therefore, the correct answer is EAP advisor.

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  • 6. 

    Which one of the following should an investor assume when working with a financial advisor?

    • A.

      The expected growth is only a projection

    • B.

      The recommendations have the consumer’s best interests in mind

    • C.

      The risk is clearly explained

    • D.

      The advisor has years of training and is qualified to make a recommendation

    Correct Answer
    A. The expected growth is only a projection
    Explanation
    When working with a financial advisor, an investor should assume that the expected growth is only a projection. This means that the predicted increase in investment value is not guaranteed and may vary from the actual results. It is important for investors to understand that projections are based on assumptions and market conditions, which can change over time. Therefore, it is crucial to consider other factors and diversify investments to mitigate potential risks and uncertainties.

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  • 7. 

    Informational text from the Internet is best used in a Money Coach reply by:

    • A.

      Using the “cut and paste” technique

    • B.

      Retyping sentences word for word

    • C.

      Gleaning useful data, then crafting that into your own response

    • D.

      Plagiarizing blatantly

    • E.

      None of the above. Money Coaches should rarely use Web sites since they are all biased.

    Correct Answer
    C. Gleaning useful data, then crafting that into your own response
    Explanation
    The correct answer is "Gleaning useful data, then crafting that into your own response." This means that when using informational text from the Internet in a Money Coach reply, it is best to extract relevant and valuable information from various sources and then create a personalized response based on that information. This approach ensures that the response is original and tailored to the specific situation or question at hand.

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  • 8. 

    Informational text from authorized use of the LFE Library of Responses is best used to respond to a client's Money Coaching question with which of the following techniques? (check all that apply)

    • A.

      Using the “cut and paste” technique for the entire Q&A

    • B.

      Recopying sentences word for word where applicable

    • C.

      Gleaning useful data, then crafting that into your own response to avoid plagiarizing

    • D.

      None of the above. Money Coaches should rarely use the LFE Library since the response probably won’t answer their specific question.

    Correct Answer(s)
    A. Using the “cut and paste” technique for the entire Q&A
    B. Recopying sentences word for word where applicable
    Explanation
    The correct answer is using the "cut and paste" technique for the entire Q&A and recopying sentences word for word where applicable. This is because the informational text from the authorized use of the LFE Library of Responses can be directly used to respond to a client's Money Coaching question. By using the "cut and paste" technique or recopying sentences word for word, the Money Coach can provide accurate and relevant information to the client without the risk of plagiarizing.

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  • 9. 

    What's the best course of action if an advisor doesn't ask any questions?

    • A.

      Walk away

    • B.

      Proceed with caution

    • C.

      Review their recommendations every six months

    • D.

      Sue for neglectful behavior

    • E.

      Use a retail Credit Counselor instead

    Correct Answer
    A. Walk away
    Explanation
    If an advisor doesn't ask any questions, it indicates a lack of interest or understanding of the individual's specific needs and goals. This suggests that the advisor may not be able to provide appropriate or personalized advice. Therefore, the best course of action would be to walk away and find another advisor who is willing to ask questions and understand the individual's financial situation before providing any recommendations.

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  • 10. 

    Which of the following would you avoid if you have investment/retirement questions?

    • A.

      CFA

    • B.

      FNP

    • C.

      CFP

    • D.

      CTFA

    • E.

      CLU

    Correct Answer
    B. FNP
    Explanation
    FNP stands for Family Nurse Practitioner, which is a healthcare profession and not related to investment or retirement questions. Therefore, if you have investment/retirement questions, you would avoid FNP.

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  • 11. 

    Which of the following statements or practices is indicative of a possible scammer? (check all that apply)

    • A.

      "I have a hot tip on a once-in-a-lifetime opportunity!"

    • B.

      "We can guarantee you will not lose money!"

    • C.

      "I require the discretion to trade in your account without prior permission."

    • D.

      Cold calls

    • E.

      Unsolicited letters or e-mail offers

    Correct Answer(s)
    A. "I have a hot tip on a once-in-a-lifetime opportunity!"
    B. "We can guarantee you will not lose money!"
    C. "I require the discretion to trade in your account without prior permission."
    D. Cold calls
    E. Unsolicited letters or e-mail offers
    Explanation
    The given answer includes statements and practices that are indicative of a possible scammer. "I have a hot tip on a once-in-a-lifetime opportunity!" is often used by scammers to lure people into fraudulent schemes. "We can guarantee you will not lose money!" is a common tactic used by scammers to gain trust and manipulate individuals into investing in fraudulent schemes. "I require the discretion to trade in your account without prior permission" is a red flag as it indicates unauthorized access to personal accounts. Cold calls and unsolicited letters or email offers are also commonly used by scammers to initiate contact and deceive individuals.

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  • 12. 

    Which of the following would you go to if you needed personal tax advice?

    • A.

      CFA

    • B.

      FNP

    • C.

      CMA

    • D.

      CPA

    • E.

      CLU

    Correct Answer
    D. CPA
    Explanation
    CPA stands for Certified Public Accountant. CPAs are professionals who specialize in accounting and taxation. They have the expertise and knowledge to provide personal tax advice to individuals. Therefore, if someone needs personal tax advice, they would go to a CPA.

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  • 13. 

    To earn the distinction of "Financial Planner," a person must go through which of the following qualifications?

    • A.

      2 years of training

    • B.

      Pass complex exams

    • C.

      Must study the tax implications of investment strategies

    • D.

      Required to obtain a CFP License

    • E.

      None of the above. No specific training is required.

    Correct Answer
    E. None of the above. No specific training is required.
    Explanation
    The correct answer is "None of the above. No specific training is required." This means that to earn the distinction of "Financial Planner," a person does not need to go through any of the qualifications listed in the options. This implies that becoming a financial planner does not necessarily require 2 years of training, passing complex exams, studying tax implications of investment strategies, or obtaining a CFP License.

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  • 14. 

    Insurance agents make excellent retirement specialists because:

    • A.

      Many of the products they sell are sold as retirement vehicles

    • B.

      They must pass strict retirement planning tests

    • C.

      Cash value life insurance is a great retirement investment

    • D.

      They must study the tax implications of investment strategies

    • E.

      None of the above. Insurance agents do NOT make good retirement specialists.

    Correct Answer
    E. None of the above. Insurance agents do NOT make good retirement specialists.
  • 15. 

    Financial advisors can help provide "Safe Harbor" protection for employers under ERISA if they:

    • A.

      Offer the best investments to those employees

    • B.

      Cover the topics included in the SOX guidelines

    • C.

      Do not stand to benefit from the education (other than getting paid just for the education)

    • D.

      Talk about the tax benefits of the company’s 401(k)

    Correct Answer
    C. Do not stand to benefit from the education (other than getting paid just for the education)
    Explanation
    Financial advisors can provide "Safe Harbor" protection for employers under ERISA if they do not stand to benefit from the education they provide, other than getting paid for it. This means that the advisors must not have any personal financial interest or gain from the advice they give to employees. By ensuring that advisors are not biased by personal incentives, employers can trust that the advice given is in the best interest of the employees and complies with ERISA regulations.

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  • 16. 

    Under the new PPA, financial advisors:

    • A.

      Are able to sell investment products to employees

    • B.

      Are largely waiting until the guidelines are more clearly defined

    • C.

      Are now required to teach employees how to select the best financial advisor to work with

    • D.

      Must cover insurance investments in their training

    Correct Answer
    B. Are largely waiting until the guidelines are more clearly defined
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