Certified Financial Planner (CFP) Practice Exam 2025 – All-in-One Study Guide for Exam Success!

When a client fails to disclose all their liabilities, it can significantly hinder the accuracy of the financial planning process, particularly in setting realistic goals. Goals in financial planning are often based on available income, expenses, and overall financial health. If liabilities are underreported or not disclosed, the planner cannot take into account the true financial obligations of the client, leading to an overly optimistic view of their financial situation.

As a result, the client may set unrealistic goals regarding savings, retirement plans, or investment strategies because the underlying financial constraints are not well understood. For instance, if a client believes they can afford to save more for retirement or purchase a home without fully understanding their debt obligations, they may face increased financial stress in the future when reality does not align with their expectations.

The other options do not align with the impact of undisclosed liabilities. Increased investment options do not occur; rather, the planner’s ability to suggest suitable investments is compromised. More accurate cash flow analysis can't be achieved without a complete understanding of financial obligations. Enhanced savings strategies would also be unfeasible if the client’s liabilities are not fully accounted for, as these strategies rely on a clear picture of net income after liabilities. Therefore, the correct answer highlights the risk of setting goals that may