Certification Practice Exam Questions

Certified Financial Planner (CFP) Certification Practice Exam Questions And Correct Answers (Verified Answers) Plus Rationales 2026 Q&A | Instant Download Pdf

• What is the primary goal of financial planning?

a) Maximizing investment returns

b) Helping clients achieve their life goals through proper financial

management

c) Reducing tax liability

d) Increasing short-term cash flow

Rationale: The CFP Board defines financial planning as helping clients

achieve their life goals through proper management of their finances.

• Which of the following best describes the fiduciary duty of a CFP

professional? 1 / 4

a) Acting in the client’s best interest only if compensated

b) Always placing the client’s interests above their own

c) Disclosing conflicts only when asked

d) Ensuring profitability of the financial plan

Rationale: CFP professionals must act as fiduciaries, placing the

client’s interest above their own at all times.

• What is the first step in the financial planning process?

a) Understanding the client’s personal and financial circumstances

b) Developing financial planning recommendations

c) Implementing recommendations

d) Monitoring progress

Rationale: The first step involves gathering data about the client’s

goals, values, and current financial situation.

• A client has a high income but low savings. What financial planning

concern should be prioritized?

a) Tax optimization

b) Cash flow management

c) Estate planning

d) Asset allocation

Rationale: Poor savings despite high income indicates a cash flow

management issue that must be addressed first.

• Which type of risk refers to the chance that an investment’s return will

differ from expectations due to market-wide changes? 2 / 4

a) Systematic risk

b) Unsystematic risk

c) Business risk

d) Liquidity risk

Rationale: Systematic risk affects all investments and cannot be

diversified away.

6. The time value of money principle implies that:

a) Money today and money tomorrow have the same value

b) Future money is worth more than present money

c) Present money is worth more than future money

d) Inflation does not affect purchasing power

Rationale: Due to potential earning capacity, money today has more

value than the same amount in the future.

• If a client wants to fund their child’s education in 15 years, which type

of account is most suitable?

a) Traditional IRA

• 401(k) plan
• 529 college savings plan

d) Money market account

Rationale: 529 plans provide tax-advantaged growth for education

expenses.

• Which of the following is considered a quantitative data point in

financial planning? 3 / 4

a) Client’s income and expenses

b) Client’s values

c) Client’s goals

d) Client’s risk tolerance

Rationale: Quantitative data includes measurable financial figures

such as income, expenses, and net worth.

9. A diversified investment portfolio helps primarily to:

a) Increase returns

b) Reduce unsystematic risk

c) Eliminate systematic risk

d) Maximize tax efficiency

Rationale: Diversification reduces company-specific (unsystematic)

risk, but not market-wide risk.

• Which of the following assets is most liquid?

a) Real estate

b) Certificates of deposit

c) Cash

d) Mutual funds

Rationale: Cash is the most liquid asset since it can be immediately

used without conversion.

• Which estate planning document allows a person to appoint

someone to make health decisions if incapacitated?

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