BU - CFP's Code of Ethics

Question 1

Code of Ethics (6)
Hint: Act

Answer 1

1. Act with honesty, integrity, competence, and diligence
2. Act in the client’s best interests
3. Exercise due care
4. Avoid or disclose and manage conflicts of interest
5. Maintain the confidentiality and protect the privacy of client information
6. Act in a manner the reflects positively on the financial planning profession and CFP certification

Question 2

Standards of Conduct - what is it? And when are the 3 times they apply?

Answer 2

Duties owed to the client, firms and subordinates and CFP Board

*Most duties apply at all times
*Add’l duties apply when providing financial advice
*Add’l duties apply when providing financial advice and financial planning

Question 3

Standard of Conducts that apply at all times to clients (11)

Answer 3

Integrity
Competence
Diligence
Sound and objective professional judgement
Professionalism
Comply with the Law
Confidentiality and Privacy
Duties when communicating with client
Duties when representing compensation method
Duties when selecting, using and recommending technology
Refrain from borrowing or lending money, and commingling financial assets

Question 4

Standard of Conducts that apply at all times with Firms & Subordinates

Answer 4

Use reasonable care when supervising
Comply with lawful objectives of CFP Professional firm
Provide notice of public discipline

Question 5

Standards of Conduct that apply at all times to the CFP Board (5)

Answer 5

Refrain from adverse conduct
Reporting
Provide narrative statement
Cooperation
Compliance with Terms and Conditions of Certification and Trademark License

Question 6

Standard of Conduct that applies when providing financial advice (5)

Answer 6

The duties that apply at all times +
Fiduciary duty
Disclose and manage conflicts of interest
Providing information to a client
Duties when recommending, engaging, and working with additional persons

Question 7

Standard of Conduct that applies when providing Financial Planning

Answer 7

The duties that apply at all times +
The duties that apply when providing financial advice +
The practice standard for financial planning process
Information to a client in writing

Question 8

Fiduciary Duty involves… (3)

Answer 8

Duty of Loyalty
Duty of Care
Duty to follow clients instructions

Question 9

Duty of Loyalty includes…(3)

Answer 9

• Place the interests of the client above the CFP and the CFP’s firm’s interests
• Avoid or fully disclose conflicts of interests and obtain client’s consent and manage appropriately
• Act without regard to the interests of the CFP or firm, meaning that acting under and conflict of interest, the duty is to still act in the best interest of the client

Question 10

Duty of Care

Answer 10

CFP must act with care, skill, prudence and diligence that a prudent professional would exercise in light of the client’s goals, risk tolerance, objectives and financial and personal circumstances

Question 11

Duty to follow client instructions

Answer 11

CFP must comply with the terms of the client engagement and follow all directs of the client that are reasonable and lawful

Question 12

Financial Planning Process

(Uber Is A Drunk Person’s Immediate Motor vehicle)

Answer 12

1. Understanding the Client’s personal and financial circumstances
2. Identifying and selecting goals
3. Analyzing the client’s current course of action and potential alternative courses
4. Developing the financial planning recommendations
5. Presenting the financial planning recommendations
6. Implementing the financial planning recommendations
7. Monitoring progress and updating

Question 13

Financial Planning Process - Step 1

Answer 13

Understanding the Client’s personal and financial circumstances

• *a. obtain qualitative and quantitative information** describe the information needed to fulfill the Scope of Engagement and collaborate
• *b. analyze information**
• *c. address incomplete information** If unable to obtain info needed, limit the scope of engagement to those services are able to provide or terminate

Question 14

Financial Planning Process - Step 2

Answer 14

Identifying and selecting goals

• *a. identifying potential goals** Develop reasonable assumptions and estimate, discuss with client and apply
• *b. selecting and prioritizing goals** Note the impact that selecting one goal may have on others & discuss any goals you think are unrealistic
• *c. determining assumptions to be made (inflation rates, investment returns, life expectancy, etc.)**

Question 15

Financial Planning Process - Step 3

Answer 15

Analyzing the client’s current course of action and potential alternative courses

• *a. analyze the current course of action** - does the current course maximize the potential for meeting goals
• *b. analyze potential alternative courses of action** potential alternative actions does not become a recommendation until the CFP selects in Step 4

Question 16

Financial Planning Process - Step 4

Answer 16

Developing the Financial planning recommendations

• *a. assumption and estimates used to develop the recommendations**
• *b. basis for making recommendations**
• *c. timing and priority of the recommendations**
• *d. whether the recommendation is independent or must be implemented with another recommendation**

Question 17

Financial Planning Process - Step 5

Answer 17

Presenting the Financial planning recommendations
a. present recommendation and information that was required to be considered when developing recommendations
b. can be represented orally, in written, over the phone or in any way that can be properly understood by the client. (May want to consider client’s learning style)

Question 18

Financial Planning Process - Step 6

Answer 18

Implementing the financial planning recommendations

• *a. addressing implementation responsibilities** - if CFP is responsible, then communicate to the client the recommendations being implemented and define the CFP responsibilities, the client’s and any third party’s
• *b. identifying, analyzing, and selecting actions, products and services**
• *c. recommending actions, products and services for implementation**
• *d. selecting and implementing actions, products and service**s

Question 19

Financial Planning Process - Step 7

Answer 19

Monitoring Progress and Updating

Establish who is responsible for monitoring: if CFP then communicate what actions, products and services are/are not subject to CFP; how and when monitoring will occur, client’s responsibility to inform of any changes, CFP’s responsibility to update the plan recommendations; how and when the plan will be updated

• *a. monitor the client’s progress**
• *b. obtain current qualitative and quantitative information**
• *c. updating goals, recommendations and implementation decisions**

NOTE: unless specifically excluded in scope of engagement, monitoring is expected

Question 20

Qualitative Information Examples

Answer 20

Health
Life expectancy
Family circumstances
Values
Attitudes
Expectations
Earnings potential
Risk tolerance
Goals, needs and priorities
Current course of action

Question 21

Quantitative Information Examples

Answer 21

Age
Dependents
Other professional advisors
Income
Expenses
Cash flow
Savings
Assets
Liabilities
Available resources
Taxes
Benefits
Government benefits
Insurance coverage
Estate plans
Education and retirement accounts and benefits

Question 22

Information that must be provided to the client via written document or orally - Financial Advice w/o Financial Planning

Answer 22

Written - Privacy Policy

Orally or Written - Conflicts of Interests, Services and Products, How the client pays, how CFP, Firm and related parties are compensated, Public discipline and bankruptcy, referral compensation arrangements, and other

Question 23

Information that must be provided to the client via written document or orally - Financial Advice WITH Financial Planning

Answer 23

Written - Privacy policy, services and products, how the client pays, how the CFP, firm and related parties are compensated, public discipline and bankruptcy, referral compensation arrangements, terms of engagement (implementing, monitoring and updating is required unless explicitly excluded), other

Orally or Written - Conflict of interests

Question 24

What is considered Financial Advice?

Answer 24

~ Communication that, based on its content, context, and presentation, would reasonably be viewed as a recommendation that the Client take or refrain from taking.

~ The exercise of discretionary authority over the financial assets of a client

Question 25

What are examples of financial advice?

Answer 25

Development or implementation of a financial plan
Advisability of investing in, purchasing, holding, gifting or selling assets
Investment policies or strategies, portfolio composition, the management of assets or other financial matter
Selection or retention of other persons to provide financial or professional serves to the client

Question 26

What is NOT financial advice?

Answer 26

~ Communication that, based on its content, context, and presentation, would not be reasonably view as a recommendation
~ Responses to directed orders
~ Marketing materials, general financial education and general financial communications that a reasonable CFP would not view as advice

Question 27

Integration Factors

Answer 27

1. The number of relevant elements of the client’s personal and financial circumstances that the advice may affect
2. The portion and amount of the client’s financial assets the advice may affect
3. The length of time the clients circumstances may be affected by the advice
4. The effect on the client’s overall exposure to risk if the advice is implemented
5. The barriers to modifying the actions taken to implement the advice

Question 28

What do you do if the client doesn’t agree to engage you in the financial plan? (4)

Answer 28

1. Not enter into the engagement
2. Limit the Scope of Engagement to services that do no require application of the Practice Standards for Financial Planning Process and describe to the client the services the CFP will not be providing
3. Provide the requested services after informing the client how planning will benefit the client and how the decision not to enter into the planning engagement may limit the advice
4. Terminate the engagement

Question 29

When must I share the following when providing financial advice, but not planning?

Answer 29

Services & Products - Initially and whenever there is a material change or update (orally or written)

How the Client pays - Initially and whenever there is a material change or update (orally or written)

How CFP & Others are compensated - Initially and whenever there is a material change or update (orally or written)

Public Discipline and Bankruptcy - within 90 days of any material changes or updates (orally or written)

Material Conflicts of Interest - Initially and whenever there is a material change or update (orally or written)

Written Privacy Policies - Initially and not less than annually (written)

Referral Compensation Arrangement - Initially and whenever there is a material change or update (orally or written)

Question 30

When must I share the following when providing financial advice AND planning?

Answer 30

Services & Products - Initially and whenever there is a material change or update (orally or written)

How the Client pays - Initially and whenever there is a material change or update (orally or written)

How CFP & Others are compensated - Initially and whenever there is a material change or update (orally or written)

Public Discipline and Bankruptcy - within 90 days of any material changes or updates (written)

Material Conflicts of Interest - Initially and whenever there is a material change or update (orally or written)

Written Privacy Policies - Initially and not less than annually (written)

Referral Compensation Arrangement - Initially and whenever there is a material change or update (written)

Terms of Engagement - Initially and whenever there is a material change (written)

Financial Planning Implementation Responsibility - prior to or at the time of engagement - unless excluded from the scope (written)

Financial Planning Monitoring and Updating Responsibility - prior to or at the time of engagement - unless excluded from the scope (written)