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Introduction to Financial Planning - CFP Board's Code of Ethics and Practice Standards-BB

Terms in this set (71)

CFP certificants?
CFP® certificants agree to abide by a strict code of professional conduct, known as CFP Board's Standards of Professional Conduct.
The Standards of Professional Conduct?
Set forth certificants' ethical responsibilities to the public, their clients, their employers, and their profession.
Code of Ethics and Professional Responsibility?
1. Integrity
2. Objectivity
3. Competence
4. Fairness
5. Confidentiality
6. Professionalism
7. Diligence
Integrity?
Allowance can be made for innocent error and legitimate differences of opinion. Clients may put you in positions of trust and confidence.
Objectivity?
Provide professional services objectively.
Competence?
Competence means attaining and maintaining an adequate level of knowledge and skill, and application of that knowledge and skill in providing services to clients.
Fairness?
Be fair and reasonable in all professional relationships. Disclose conflicts of interest.
Confidentiality?
Protect the confidentiality of all client information.
Professionalism?
Act in a manner that demonstrates exemplary professional conduct.
Diligence?
Provision of services in a reasonably prompt and thorough manner, including the proper planning for, and supervision of, the rendering of professional services.
Rules of Conduct
Binding on all certificants, whether or not the CFP marks are used.
Considering Rules of Conduct?
Certificant must determine whether a specific Rule is applicable to those services.
Violations of the Rules of Conduct?
Discipline extends to the rights of registrants and certificants to use the CFP® marks.
Four Rules of Conduct?
Rules 1.1 and 1.2 set forth the ethical obligations for the first step of the financial planning process. Rules 1.2 and 1.3 require written agreements about the scope of the financial planning engagement and the services to be provided. Rule 1.4 provides an explanation of the duty of care standard when working with clients.
Rule 1.1?
The certificant and the prospective client or client shall mutually agree upon the services to be provided by the certificant.
Rule 1.2?
a.The obligations and responsibilities of each party under the agreement with respect to:i.Defining goals, needs and objectives,
ii.Gathering and providing appropriate data,
iii.Examining the result of the current course of action without changes,
iv.The formulation of any recommended actions,
v.Implementation responsibilities, and
vi.Monitoring responsibilities.

b.Compensation that any party to the agreement or any legal affiliate to a party to the agreement will or could receive under the terms of the agreement; and factors or terms that determine costs, how decisions benefit the certificant and the relative benefit to the certificant.
c.Terms under which the agreement permits the certificant to offer proprietary products.
d.Terms under which the certificant will use other entities to meet any of the agreement's obligations.
Rule 1.3?
If the services include financial planning or material elements of financial planning, the certificant or the certificant's employer shall enter into a written agreement governing the financial planning services ("Agreement").

The Agreement shall specify:
a.The parties to the Agreement,
b.The date of the Agreement and its duration,
c.How and on what terms each party can terminate the Agreement, and
d.The services to be provided as part of the Agreement.
Rule 1.4?
A certificant shall at all times place the interest of the client ahead of his or her own.
Two Rules of Conduct that discuss what information should be disclosed to prospective clients and clients?
Rule 2.1 makes clear that CFP® professionals have an ethical duty to inform potential clients if they believe circumstances will prevent them from providing a certain service. Rule 2.2 requires written disclosures about compensation and conflicts during the financial planning engagement.
Rule 2.1?
A certificant shall not communicate, directly or indirectly, to clients or prospective clients any false or misleading information directly or indirectly related to the certificant's professional qualifications or services. A certificant shall not mislead any parties about the potential benefits of the certificant's service. A certificant shall not fail to disclose or otherwise omit facts where that disclosure is necessary to avoid misleading clients.
Rule 2.2?
A certificant shall disclose to a prospective client or client the following information:

1. Description of compensation arrangement. Must include:

a. Information related to costs and compensation.
b. sources of compensation
c. general summary of likely conflicts of interest between the client and the certificant
d. Any information about the certificant or the certificant's employer that could reasonably be expected to materially affect the client's decision to engage the certificant that the client might reasonably want to know in establishing the scope and nature of the relationship
e. Contact information for the certificant and, if applicable, the certificant's employer
f. If the services include financial planning or material elements of financial planning, these disclosures must be in writing
How many rules of conduct pertain to client information and property?
Ten.
Rule 3.1?
A certificant shall treat information as confidential except as required in response to proper legal process; as necessitated by obligations to a certificant's employer or partners; as required to defend against charges of wrongdoing; in connection with a civil dispute; or as needed to perform the services.
Rule 3.2?
A certificant shall take prudent steps to protect the security of information and property, including the security of stored information, whether physically or electronically, that is within the certificant's control.
Rule 3.3?
A certificant shall obtain the information necessary to fulfill his or her obligations. If a certificant cannot obtain the necessary information, the certificant shall inform the prospective client or client of any and all material deficiencies.
Rule 3.4?
A certificant shall clearly identify the assets, if any, over which the certificant will take custody, exercise investment discretion, or exercise supervision.
Rule 3.5?
A certificant shall identify and keep complete records of all funds or other property of a client in the custody, or under the discretionary authority, of the certificant.
Rule 3.6?
A certificant shall not borrow money from a client. Exceptions to this Rule include:

a.The client is a member of the certificant's immediate family, or
b.The client is an institution in the business of lending money and the borrowing is unrelated to the professional services performed by the certificant.
Rule 3.7?
A certificant shall not lend money to a client. Exceptions to this Rule include:

a.The client is a member of the certificant's immediate family, or
b.The certificant is an employee of an institution in the business of lending money and the money lent is that of the institution, not the certificant.
Rule 3.8?
A certificant shall not commingle a client's property with the property of the certificant or the certificant's employer, unless the commingling is permitted by law or is explicitly authorized and defined in a written agreement between the parties.
Rule 3.9?
A certificant shall not commingle a client's property with other clients' property unless the commingling is permitted by law or the certificant has both explicit written authorization to do so from each client involved and sufficient record-keeping to track each client's assets accurately.
Rule 3.10?
A certificant shall return a client's property to the client upon request as soon as practicable or consistent with a time frame specified in an agreement with the client.
How many rules of conduct pertain to obligations to clients?
Seven.
Rule 4.1?
A certificant shall treat prospective clients and clients fairly and provide professional services with integrity and objectivity.

This Rule combines three Principles in the Code of Ethics: Integrity, Objectivity and Fairness.
Rule 4.2?
A certificant shall offer advice only in those areas in which he or she is competent to do so and shall maintain competence in all areas in which he or she is engaged to provide professional services.
Rule 4.3?
A certificant shall be in compliance with applicable regulatory requirements governing professional services provided to the client.
Rule 4.4?
A certificant shall exercise reasonable and prudent professional judgment in providing professional services to clients.
Rule 4.5?
In addition to the requirements of Rule 1.4, a certificant shall make and/or implement only recommendations that are suitable for the client.
Rule 4.6?
A certificant shall provide reasonable and prudent professional supervision or direction to any subordinate or third party to whom the certificant assigns responsibility for any client services.
Rule 4.7?
A certificant shall advise his or her current clients of any certification suspension or revocation he or she receives from CFP Board.
How many rules of conduct pertain to obligations to employers?
Two.
Rule 5.1?
A certificant who is an employee/agent shall perform professional services with dedication to the lawful objectives of the employer/principal and in accordance with CFP Board's Code of Ethics.
Rule 5.2?
A certificant who is an employee/agent shall advise his or her current employer/principal of any certification suspension or revocation he or she receives from CFP Board.
How many rules of conduct pertain to obligations to CFP Board?
Five.
Rule 6.1?
A certificant shall abide by the terms of all agreements with CFP Board, including, but not limited to, using the CFP® marks properly and cooperating fully with CFP Board's trademark and professional review operations and requirements.
Rule 6.2?
A certificant shall meet all CFP Board requirements, including continuing education requirements, to retain the right to use the CFP® marks.
Rule 6.3?
A certificant shall notify CFP Board of changes to contact information, including, but not limited to, e-mail address, telephone number(s) and physical address, within forty five (45) days.
Rule 6.4?
A certificant shall notify CFP Board in writing of any conviction of a crime, except misdemeanor traffic offenses or traffic ordinance violations unless such offense involves the use of alcohol or drugs, or of any professional suspension or bar within ten (10) calendar days after the date on which the certificant is notified of the conviction, suspension or bar.
Rule 6.5?
A certificant shall not engage in conduct which reflects adversely on his or her integrity or fitness as a certificant.
Financial Planning Practice Standards?
Describe best practices of financial planning professionals providing professional services. Drawn from six elements of financial planning process. Applies to all CFPs when performing tasks of financial planning.
CFP Board's Practice Standards are intended to?
■Assure that the practice of financial planning by CERTIFIED FINANCIAL PLANNER™ professionals is based on established norms of practice
■Advance professionalism in financial planning, and
■Enhance the value of the financial planning process.
Establishing and defining the relationship with a client relates to?
100-1 Defining the Scope of the Engagement
Gathering client data relates to?
200-1 Determining a Client's Personal and Financial Goals, Needs and Priorities
200-2 Obtaining Quantitative Information and Documents
Analyzing and evaluating the client's financial status relates to?
300-1 Analyzing and Evaluating the Client's Information
Developing and presenting financial planning recommendations relates to?
400-1 Identifying and Evaluating Financial Planning Alternative(s) 400-2 Developing the Financial Planning
Recommendation(s) 400-3 Presenting the Financial Planning Recommendation(s)
Implementing the financial planning recommendations relates to?
500-1 Agreeing on Implementation Responsibilities
500-2 Selecting Products and Services for Implementation
Monitoring relates to?
600-1 Defining Monitoring Responsibilities
Each Practice Standard consists of the following steps?
■A statement regarding one of the steps of the financial planning process
■An explanation of the Practice Standard
■The relationship of the Practice Standard to the Code of Ethics and Rules of Conduct
■The expected impact of the Practice Standard on the public, the profession and the practitioner
Practice Standard 100-1
Defining the Scope of the Engagement

The financial planning practitioner and the client shall mutually define the scope of the engagement before any financial planning service is provided.

This process is accomplished in financial planning engagements by:
1.Identifying the service(s) to be provided;
2.Disclosing the practitioner's material conflict(s) of interest;
3.Disclosing the practitioner's compensation arrangement(s);
4.Determining the client's and the practitioner's responsibilities;
5.Establishing the duration of the engagement; and
6.Providing any additional information necessary to define or limit the scope.
Practice Standard relates to?
CFP Board's Code of Ethics and Rules of Conduct:
■Principle 4 - Fairness
■Principle 7 - Diligence and
■Rules 1.1, 1.2, 1.3 and 2.2
Practice Standard 200-1?
Determining a Client's Personal and Financial Goals, Needs and Priorities

The financial planning practitioner and the client shall mutually define the client's personal and financial goals, needs and priorities that are relevant to the scope of the engagement before any recommendation is made and/or implemented.

This Practice Standard relates to CFP Board's Code of Ethics and Rules of Conduct:
■Principle 7 - Diligence and
■Rules 3.3, 4.4 and 4.5
Practice Standard 200-2?
Obtaining Quantitative Information and Documents

The financial planning practitioner shall obtain sufficient quantitative information and documents about a client relevant to the scope of the engagement before any recommendation is made and/or implemented.

This Practice Standard relates to CFP Board's Code of Ethics and Rules of Conduct:
■Principle 7 - Diligence and
■Rules 3.3, 4.4 and 4.5
Practice Standard 300-1?
Analyzing and Evaluating the Client's Information

A financial planning practitioner shall analyze the information to gain an understanding of the client's financial situation and then evaluate to what extent the client's goals, needs and priorities can be met by the client's resources and current course of action.

This Practice Standard relates to CFP Board's Code of Ethics and Rules of Conduct:
■Principle 2 - Objectivity
■Principle 3 - Competence
■Principle 7 - Diligence and
■Rules 1.4, 4.1, 4.4 and 4.5
Three Practice Standards emphasize the distinction between the several tasks that are a part of this process?
■What is Possible?
■What is Recommended?
■How is it Presented?

The first two Practice Standards involve the creative thought, the analysis and the professional judgment of the practitioner
Practice Standard 400-1?
Identifying and Evaluating Financial Planning Alternative(s)

The financial planning practitioner shall consider sufficient and relevant alternatives to the client's current course of action in an effort to reasonably meet the client's goals, needs and priorities.

This Practice Standard relates to CFP Board's Code of Ethics and Rules of Conduct:
■Principle 2 - Objectivity
■Principle 3 - Competence
■Principle 6 - Professionalism
■Principle 7 - Diligence and
■Rules 1.4, 4.1 and 4.5
Practice Standard 400-2?
Developing the Financial Planning Recommendation(s)

The financial planning practitioner shall develop the recommendation(s) based on the selected alternative(s) and the current course of action in an effort to reasonably meet the client's goals, needs and priorities

This Practice Standard relates to CFP Board's Code of Ethics and Rules of Conduct:
■Principle 2 - Objectivity
■Principle 3 - Competence
■Principle 6 - Professionalism
■Principle 7 - Diligence and
■Rules 1.4, 4.1 and 4.5
Practice Standard 400-3?
Presenting the Financial Planning Recommendation(s)

The financial planning practitioner shall communicate the recommendation(s) in a manner and to an extent reasonably necessary to assist the client in making an informed decision.

This Practice Standard relates to CFP Board's Code of Ethics and Rules of Conduct:
■Principle 1 - Integrity
■Principle 2 - Objectivity
■Principle 6 - Professionalism and
■Rules 2.1, 4.1, 4.4 and 4.5
Practice Standard 500-1?
Agreeing on Implementation Responsibilities

The financial planning practitioner and the client shall mutually agree on the implementation responsibilities consistent with the scope of the engagement.

This Practice Standard relates to CFP Board's Code of Ethics and Rules of Conduct:
■Principle 3 - Competence
■Principle 4 - Fairness
■Principle 6 - Professionalism
■Principle 7 - Diligence and
■Rules 1.2, 2.2, 4.1 and 4.4
Practice Standard 500-2?
Selecting Products and Services for Implementation

The financial planning practitioner shall select appropriate products and services that are consistent with the client's goals, needs and priorities.

This Practice Standard relates to CFP Board's Code of Ethics and Rules of Conduct:
■Principle 2 - Objectivity
■Principle 4 - Fairness
■Principle 6 - Professionalism
■Principle 7 - Diligence and
■Rules 1.2, 1.4, 2.2, 4.1, 4.4 and 4.5
Practice Standard 600-1?
Defining Monitoring Responsibilities

The financial planning practitioner and client shall mutually define monitoring responsibilities.

This Practice Standard relates to CFP Board's Code of Ethics and Rules of Conduct:
■Principle 7 - Diligence and
■Rules 1.2, 3.3, 3.4 and 4.1
CFP® and the Trademark Symbol?
■CFP® and CERTIFIED FINANCIAL PLANNER™ should always be used with one of CFP Board's preferred nouns, such as "certificant," "professional," "practitioner," "certification," or "mark."
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