Module 1: Financial Planning Process and Ethics
What Module 1 tests
Module 1 covers the financial planning process, client engagement, data gathering, goal setting, analysis, recommendation, implementation, and monitoring. It also tests ethics: fiduciary duty, disclosure of conflicts, confidentiality, competence, and documentation. Expect questions that ask what step comes next or which conduct is acceptable.
Core rules
- Treat the plan as a documented process, not a product sale. Establish scope and compensation before advice.
- Use qualitative and quantitative data: goals, attitudes, cash flow, balance sheet, tax status, existing policies, and estate documents.
- Test feasibility with explicit assumptions: inflation, return, taxes, fees, and time horizon. Keep nominal and real values separate.
- Recommendations must be suitable, prioritized, and traceable to the client's goals. Record client decisions and declines.
Worked example
A 52-year-old wants to retire at 55 with $60,000 annual spending. Current investable assets are $500,000; savings are $20,000 per year. At a 5% nominal return and 2.5% inflation, the planner first converts the goal to today's dollars and projects the gap. The issue is not just the $500,000 balance; the three-year accumulation and 30-year decumulation must be modeled. If projected capital is short, the planner presents trade-offs: retire later, save more, reduce spending, or accept more risk if suitable. The recommendation is documented with assumptions.
Traps
Confusing the plan with a single product; skipping scope and conflicts; using a return assumption that ignores inflation or fees; promising outcomes; failing to document monitoring.