TOOLS & TECHNIQUES OF FINANCIAL PLANNING
8th Edition
College Course Materials
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.
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, well-
defined 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:
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
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
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:
8th Edition
College Course Materials
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.
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, well-
defined 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:
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
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
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:
