CFP Glossary

Question 1

CFP® Professional’s Firm(s)

Answer 1

• Any entity on behalf of which a CFP® professional provides Professional Services to a Client, and
• has the authority to exercise control over professional activities, incl.
  
  • employer
  • broker-dealer
  • registered investment adviser
  • insurance company, and
  • insurance agency.

Question 2

Client

Answer 2

Any person, including a

• natural person,
• business organization, or
• legal entity,

to whom the CFP® professional provides or agrees to provide Professional Services pursuant to an Engagement

Question 3

Conflict of interest

Answer 3

1. When a CFP® professional’s interests (including the interests of the CFP® Professional’s Firm) are adverse to the CFP® professional’s duties to a Client, or
2. When a CFP® professional has duties to one Client that are adverse to another Client

Question 4

Control

Answer 4

The power, directly or indirectly, to direct the management or policies of the entity at the relevant time, through ownership, by contract, or otherwise

Question 5

Control Person

Answer 5

Any person who has Control

Question 6

Engagement

Answer 6

An oral or written agreement, arrangement, or understanding

Question 7

Family

Answer 7

Grandparent, parent, stepparent, father-in-law/mother-in-law, uncle/aunt, spouse, former spouse, spousal equivalent, domestic partner, brother/sister, stepsibling, brother-in-law/sister-in-law, cousin, son/ daughter, stepchild, son-in-law/daughter-in law, nephew/niece, grandchild, and any other person the CFP® professional, directly or indirectly, supports financially to a material extent

Question 8

Financial Advice

Answer 8

1. A communication that, based on its content, context, and presentation, would reasonably be viewed as a recommendation that the Client take or refrain from taking a particular course of action with respect to:
   
   1. The development or implementation of a financial plan
   2. The value of or the advisability of investing in, purchasing, holding, or selling Financial Assets
   3. Investment policies or strategies, portfolio composition, the management of Financial Assets, or other financial matters
   4. The selection and retention of other persons to provide financial or Professional Services to the Client; or
2. The exercise of discretionary authority over the Financial Assets of a Client

Question 9

Determination of Finacial Advice

Answer 9

Objective, not subjective

The more individually tailored the communication is to the Client, the more likely the communication will be viewed as Financial Advice.

The provision of services or the furnishing or making available of marketing materials, general financial education materials, or general financial communications that a reasonable CFP® professional would not view as Financial Advice, does not constitute Financial Advice

Question 10

Financial Assets

Answer 10

Securities, insurance products, real estate, bank instruments, commodities contracts, derivative contracts, collectibles, or other financial products

Question 11

Financial Planning

Answer 11

A collaborative process that helps maximize a Client’s potential for meeting life goals through Financial Advice that integrates relevant elements of the Client’s personal and financial circumstances

Question 12

Material

Answer 12

Information is material when a reasonable Client or prospective Client would consider the information important in making a decision

Question 13

Professional Services

Answer 13

Financial Advice and related activities and services that are offered or provided, including, but not limited to, Financial Planning, legal, accounting, or business planning services

Question 14

Related Party

Answer 14

A person or business entity (including a trust) whose receipt of Sales-Related Compensation a reasonable CFP® professional would view as benefiting the CFP® professional or the CFP® Professional’s Firm, including, for example, as a result of the CFP® professional’s ownership stake in the business entity. There is a rebuttable presumption that a Related Party includes:

Family Members. A member of the CFP® professional’s Family and any business entity that the Family or members of the Family Control; andBusiness Entities. A business entity that the CFP® professional or the CFP® Professional’s Firm Controls, or that is Controlled by or is under common Control with, the CFP® Professional’s Firm

Question 15

Scope of Engagement

Answer 15

The Professional Services to be provided pursuant to an Engagement.

Question 16

Relevant Elements

Answer 16

Vary from Client to Client, and

May include the Client’s need for or desire to: develop goals, manage assets and liabilities, manage cash flow, identify and manage risks, identify and manage the financial effect of health considerations, provide for educational needs, achieve financial security, preserve or increase wealth, identify tax considerations, prepare for retirement, pursue philanthropic interests, and address estate and legacy matters.

Question 17

Integration Factors

Answer 17

1. The number of relevant elements of the Client’s personal and financial circumstances that the Financial Advice may affect
2. The portion and amount of the Client’s Financial Assets that the Financial Advice may affect
3. The length of time the Client’s personal and financial circumstances may be affected by the Financial Advice
4. The effect on the Client’s overall exposure to risk if the Client implements the Financial Advice
5. The barriers to modifying the actions taken to implement the Financial Advice.