The CFP Certification Examination is computer-based and multiple choice. It uses standalone questions and client-case vignettes that ask you to apply planning concepts, calculations, client constraints, and professional standards. These practice questions focus on choosing the best answer for the facts given—not adding assumptions the vignette does not support.
For each question, select an answer in the practice item and then read the explanation. Notice both why the best option fits and why the strongest distractor falls short. In case-based questions, first identify what the client wants, what limits the options, and what the question is actually asking.
1. Balancing emergency savings and high-interest debt
This question tests whether you can weigh liquidity against a costly liability without applying a blanket rule. A MySummaries practice item on cash flow and debt looks like this:
A client has $12,000 in savings, monthly essential expenses of $4,000, stable employment, and $6,000 of credit card debt at 24% APR. The client asks what to do with the next $6,000 of available cash. Which is the best recommendation?
Paying off the 24% debt avoids a high, known interest cost while leaving three months of stated essential expenses in savings. Investing has uncertain returns and does not reliably compensate for a 24% borrowing cost. The facts do not justify draining the existing reserve or imposing a six-month target as a requirement.
The important comparison is the certain 24% borrowing cost against uncertain investment returns. The existing reserve also matters: the client is not choosing between paying debt and having no cash at all. The answer uses the stated expenses and savings rather than importing a universal emergency-fund rule.
2. A will and a retirement account beneficiary
This question tests whether you distinguish an account’s beneficiary designation from instructions in a will. A MySummaries practice item on estate planning looks like this:
A client’s will leaves the entire estate to a current spouse. The client’s IRA beneficiary form, completed years ago, names a former spouse. The client asks whether the will automatically changes who receives the IRA. What is the best next step?
Retirement accounts generally pass according to the beneficiary designation on file, rather than the will. The planner should verify the current form and help the client take any desired change through the custodian, while considering applicable rules and consequences. The will does not automatically update the form, and the vignette does not support an immediate transfer recommendation.
The strongest distractor is the claim that the will controls. A useful planning response identifies the document that governs the asset and then checks what is actually on file. Do not assume the old designation is still valid or that the client has already taken the steps needed to change it.
3. Tax treatment of employer-paid disability benefits
This item tests how the source of premium payments affects the tax treatment described in a planning question. A MySummaries practice item on insurance and taxes looks like this:
An employee receives disability benefits under a group policy. The employer paid the full premium, and the employee did not include the premium in taxable income. What is the usual federal income-tax treatment of the benefits?
When the employer pays the premium and the employee does not include it in taxable income, disability benefits are generally taxable to the employee. The tax treatment is not determined simply by the fact that a policy is insurance. If an employee pays premiums with after-tax dollars, benefits are generally treated differently; that is not the fact pattern here.
Read the premium-payment facts carefully. A small change—such as the employee paying premiums with after-tax dollars—can change the answer. The strongest distractor relies on a broad assumption that insurance proceeds are always tax-free.
4. Evaluating a possible Roth conversion
This question tests whether you recommend analysis before acting when the vignette leaves key tax effects unspecified. A MySummaries practice item on retirement and tax planning looks like this:
A 60-year-old client expects lower taxable income this year than in some future working years and is considering converting part of a traditional IRA to a Roth IRA. The client has not estimated the tax cost or identified how to pay it. What is the best next step?
A lower-income year may make a partial conversion worth evaluating, but it does not establish that a full conversion is best. Estimate the tax effect at different conversion amounts and assess the client’s broader plan, including how the tax will be paid. The vignette gives no basis for ruling out a conversion by age or recommending one without analysis.
A good answer respects the possibility that a conversion could help while refusing to treat one fact as enough to set the amount. The strongest distractor is converting everything based only on current income; it ignores the tax bill and the client’s longer-term circumstances.
5. Recognizing a wash sale
This question tests a specific tax rule and whether you notice a transaction by a spouse. A MySummaries practice item on tax-aware investing looks like this:
A client sells shares of a stock at a loss in a taxable account. Ten days later, the client’s spouse buys substantially identical shares in a taxable account. What is the likely federal tax result for the loss?
The wash-sale rule generally disallows a loss when substantially identical securities are acquired within 30 days before or after the loss sale. A spouse’s purchase can count; changing which spouse owns the replacement shares does not automatically avoid the rule. The strongest distractor overlooks the timing window and the spouse’s transaction.
When reviewing a tax-loss sale, check purchases by the client and spouse within the relevant period, not just activity in the selling account. The 30-day window runs before and after the sale. Avoid claiming a loss is currently deductible without checking the facts around replacement purchases.
6. Matching an investment to a near-term goal
This question tests time horizon and risk capacity. A MySummaries practice item on investments looks like this:
A client plans to use $40,000 for a home purchase in 18 months. The money is currently in cash, and the client says they would like to earn more but cannot delay the purchase if markets fall. Which is the best recommendation for these funds?
The 18-month horizon and the client’s inability to delay the purchase make preservation and access central constraints. A liquid, lower-volatility option is more consistent with the stated goal than taking substantial market risk. Bonds can lose value, and dividends or diversification do not remove the risk that the needed funds will be worth less at the purchase date.
The client’s time horizon is not just a number: the stated inability to delay makes a shortfall particularly consequential. Do not promise that any investment is risk-free. The recommendation should fit the use and timing of these particular funds.
7. Estimating a life insurance coverage gap
This question tests a basic needs calculation. A MySummaries practice item on insurance needs looks like this:
A client’s estimated needs are $500,000 to repay a mortgage, $300,000 for education goals, and $700,000 for income replacement. Available resources dedicated to these needs are $400,000, and existing life insurance is $500,000. Ignoring taxes, inflation, and other costs as instructed, what is the estimated additional coverage gap?
Total stated needs are $1,500,000. Subtract $400,000 of resources and $500,000 of existing coverage: $1,500,000 − $900,000 = $600,000. The $1,000,000 option subtracts existing insurance but overlooks the other resources. This is the requested simplified gap, not a complete policy recommendation.
Show the arithmetic in order: add the needs, then subtract both existing resources and insurance. The instruction to ignore taxes, inflation, and other costs defines the calculation; do not add them back into this answer. A full recommendation could require further analysis, but that is not what this question asks.
8. Calculating a college savings contribution
This item tests the future value of current savings and the value of regular end-of-year contributions. A MySummaries practice item on education planning looks like this:
A client has $30,000 in a college account and wants $60,000 in five years. Assume a 5% annual return, annual compounding, and equal contributions made at the end of each year. Approximately how much must the client contribute each year?
The existing $30,000 grows to about $38,288: $30,000 × 1.05⁵. The remaining target is about $21,712. The five end-of-year contributions accumulate by a factor of ((1.05⁵ − 1) ÷ 0.05), or about 5.526, so the annual contribution is about $21,712 ÷ 5.526 = $3,930. The $6,000 distractor divides the shortfall by five but ignores investment growth on contributions.
Keep the timing assumption attached to the result: end-of-year contributions earn less than beginning-of-year contributions. In a live question, use the stated assumptions and match the answer to the requested approximation. A projected return is an assumption for the calculation, not a guaranteed result.
9. Reviewing a concentrated employer-stock position
This question tests whether you identify both investment risk and potential tax consequences before proposing a transaction. A MySummaries practice item on portfolio decisions looks like this:
A client holds 45% of their investment portfolio in employer stock. The shares have a low cost basis, and the client is concerned about concentration risk but does not want an unexpected tax bill. What is the best next step?
The position creates substantial single-company exposure, but the low basis makes tax consequences relevant. Assess both risks and possible ways to reduce concentration before settling on a transaction plan. Immediate sale may be too blunt; never selling ignores portfolio risk. Borrowing introduces additional costs and risks rather than resolving the analysis.
The best next step integrates the client’s investment exposure with the tax constraint. The vignette does not tell you the client’s tax rate, other assets, or an appropriate sale schedule, so do not invent those facts. A reasonable plan may require comparing alternatives before choosing a transaction.
10. Handling a compensation conflict
This final question tests professional judgment: disclosure matters, but it does not make an unsuitable recommendation appropriate. A MySummaries practice item on professional duties looks like this:
A CFP professional can receive a commission for recommending a proprietary fund. Based on the client’s documented goals, risk tolerance, and costs, a diversified lower-cost alternative appears to fit better. What should the professional do?
The professional must evaluate the recommendation in the client’s best interest and address relevant conflicts and disclosure duties; simply mentioning compensation does not justify choosing an inferior fit. The client’s goals, risk tolerance, and costs are stated facts. The other options either treat disclosure as a substitute for sound advice or conceal relevant information.
When a question includes compensation, look for the client’s interests, the actual alternatives, and the professional duty—not a shortcut that treats disclosure as permission to recommend anything. Apply the facts in the vignette and avoid assuming that a product is suitable merely because it is available through the firm.
Review what you missed
After working through the set, classify errors: missed facts, incorrect concepts, calculation or assumption errors, and choosing an action before doing necessary analysis. A MySummaries weak-area summary could look like this:
Use a weak area to choose the next study task. For calculation errors, redo the setup and check units and timing. For judgment errors, identify the client’s goal and constraints before comparing options. A MySummaries remediation card from a repeated miss could look like this:
You lost this mark twice: what is the general wash-sale window around a loss sale, and whose substantially identical purchase can matter?
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