BU - Standard of Conduct

Question 1

Fiduciary Duty

Answer 1

At all times when providing Financial Advice to a Client, a CFP® professional must act as a fiduciary, and therefore, act in the best interests of the Client. The following duties must be fulfilled:

Duty of Loyalty.

• A CFP must place the interests of the Client above the interests of the CFP and Firm;
• Avoid Conflicts of Interest, or fully disclose Material Conflicts of Interest to the Client, obtain the Client’s informed consent, and properly manage the conflict;
• Act without regard to the financial or other interests of the CFP, the Firm, or any individual or entity other than the Client, which means that a CFP acting under a Conflict of Interest continues to have a duty to act in the best interests of the Client and place the Client’s interests above the CFP.

Duty of Care.
- A CFP must act with the 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.

Duty to Follow Client Instructions.
-A CFP® professional must comply with all objectives, policies, restrictions, and other terms of the Engagement and all reasonable and lawful directions of the Client.

Question 2

Integrity

Answer 2

• demands honesty and candor, which may not be subordinated to personal gain or advantage.
• Allowance may be made for innocent error and legitimate differences of opinion, but integrity cannot co-exist with deceit or subordination of principle.
• A CFP® professional may not, directly or indirectly, in the conduct of Professional Services:
• -Employ any device, scheme, or artifice to defraud;
• -Make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or
• -Engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.

Question 3

Competence

Answer 3

• with relevant knowledge and skill to apply that knowledge
  Actions when CFP doesn’t have competence:
  -must gain competence
  -obtain the assistance of a competent professional
  -limit or terminate the Engagement
• and/or refer the Client to a competent professional.

The CFP® professional shall describe to the Client any requested Professional Services that the CFP® professional will not be providing.

Question 4

Diligence

Answer 4

CFP® professional must provide Professional Services, including responding to reasonable Client inquiries, in a timely and thorough manner

Question 5

Disclose and Manage Conflict

Answer 5

When providing Financial Advice, must fully disclose all material conflicts of interest
CFP must provide the client with sufficiently specific facts so that a reasonable client would be able to understand the Conflict
Written isn’t required

Question 6

Sound and Objective professional judgment

Answer 6

must exercise professional judgment on behalf of the Client
may not solicit or accept any gift, gratuity, entertainment, non-cash compensation, or other consideration that reasonably could be expected to compromise the CFP® professional’s objectivity.

Question 7

Professionalism

Answer 7

must treat Clients, prospective Clients, fellow professionals, and others with dignity, courtesy, and respect.

Question 8

Comply with the law

Answer 8

-must comply with the laws, rules, and regulations governing Professional Services.

Question 9

Confidentiality & Privacy

Answer 9

-must keep confidential and may not disclose any non-public personal information about any prospective, current, or former Client (“client”)
-Except:
For ordinary business purposes - CFP’s attorney’s, accountants and auditors, person acting in a rep capacity on behalf of client
For legal and enforcement purposes - subpoenas, to defend against allegations, CFP board concerning investigation

Question 10

Provide Information to a Client

Answer 10

Material changes & disciplinary updates must be disclosed to clients within 90 days

Question 11

Duties with Communication with a Client

Answer 11

Accurate information in a manner and format that a client reasonably may be expected to understand

Question 12

Duties when representing compensation method

Answer 12

Fee-Only - no sales-related comp, and related parties are no sales-related comp
Fee-Based - “Fee & commission”
Sales Related Comp - compensation resulting from a client purchasing or selling certain assets, Commissions, trailing commissions, 12b-1 fees, spreads, transaction fees

Question 13

Duties when recommending, engaging, and working with add’l persons

Answer 13

• Have a reasonable basis for the recommendation or Engagement based on the person’s reputation, experience, and qualifications;
• Disclose to the Client, at the time of the recommendation or prior to the Engagement, any arrangement by which someone who is not the Client will compensate
• exercise reasonable care to protect the Client’s interests

Question 14

Duties when selecting, using or recommending technology

Answer 14

must exercise reasonable care and judgement
must have reasonable understanding of the assumptions and outcomes of the technology
must have reasonable basis for believing that the technology produces reliable, objective and appropriate outcomes

Question 15

Refrain from borrowing or lending money or commingling assets..unless

Answer 15

client is a member of the CFP family

the lender is a business organization in the business of lending