CFP Research & Evidence-Based Practice 3 — Questions and Answers
Question 1: A planner notices that clients who received financial education also tend to have higher incomes. This makes it difficult to determine if education alone improved savings rates. This is an example of:
- Random sampling error
- Confounding variable (Correct answer)
- Type I error
- Selection bias in randomization
Correct answer: Confounding variable
A confounding variable (income) is associated with both the independent variable (education) and the outcome (savings), making it hard to isolate the true effect.
Question 2: Which statistical measure is most appropriate for describing the typical account balance in a dataset heavily skewed by a few ultra-high-net-worth clients?
- Mean
- Median (Correct answer)
- Standard deviation
- Mode
Correct answer: Median
The median is resistant to extreme outliers and better represents the 'typical' value in a skewed distribution than the mean.
Question 3: A CFP practitioner applies a strategy that academic research supports as effective but finds it doesn't work for a specific client. What does evidence-based practice dictate?
- Abandon the strategy immediately based on client outcome
- Integrate research evidence with client-specific circumstances and professional judgment (Correct answer)
- Always follow research evidence regardless of individual client results
- Consult only peer-reviewed finance journals for guidance
Correct answer: Integrate research evidence with client-specific circumstances and professional judgment
Evidence-based practice integrates the best available research evidence with practitioner expertise and client-specific values and circumstances.
Question 4: Researcher A finds that investors who use financial advisors retire with more wealth. Researcher B points out that wealthier people are more likely to hire advisors in the first place. Researcher B is describing:
- Type II error
- Reverse causality (Correct answer)
- Publication bias
- Response bias
Correct answer: Reverse causality
Reverse causality occurs when the presumed cause (using an advisor) may actually be the effect, with wealth driving advisor use rather than the reverse.
Question 5: A study randomly assigns 500 households to either receive a financial planning intervention or a control condition. This design is best described as:
- Quasi-experimental
- True experimental (randomized controlled trial) (Correct answer)
- Retrospective case-control
- Cross-sectional observational
Correct answer: True experimental (randomized controlled trial)
Random assignment to treatment and control groups is the hallmark of a true experimental (randomized controlled trial) design.
Question 6: A CFP exam candidate reads a research abstract claiming a new investment approach outperforms the market. The FIRST critical appraisal question to ask is:
- Was the sample size at least 1,000 participants?
- Was the study published in the last five years?
- What were the research methods, and is the study design appropriate to the question? (Correct answer)
- Did the authors have any industry affiliations?
Correct answer: What were the research methods, and is the study design appropriate to the question?
Evaluating whether the research design is appropriate to the research question is the foundational step in critically appraising any study.
Question 7: When researchers conduct a meta-analysis on the impact of automatic enrollment on retirement savings, they are primarily:
- Conducting a new experiment with fresh participant data
- Pooling and statistically combining results from multiple existing studies (Correct answer)
- Surveying a cross-section of plan sponsors
- Reviewing regulatory guidance from the Department of Labor
Correct answer: Pooling and statistically combining results from multiple existing studies
A meta-analysis statistically combines findings from multiple existing studies to produce a more precise overall estimate of an effect.
CFP Research & Evidence-Based Practice 3
A planner notices that clients who received financial education also tend to have higher incomes.
This makes it difficult to determine if education alone improved savings rates.
This is an example of: