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CFP > Ethics > Flashcards

Ethics Flashcards

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CFP® flashcards
1
Q

What are the duties of the fiduciary duty

A

Duty of loyalty
Duty of care
Duty to follow clients instructions

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2
Q

What is the duty of care?

A

Act with care, skill, prudence, and filling ends that a prudent professional would exercise in light of clients goals, risk tolerance, but objectives, and financial and personal circumstances

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3
Q

Definition of a client

A

Any person (natural person, business organization, legal entity) to whom the CFP professional provides professional services pursuant to an engagement

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4
Q

For financial planning what is the only thing that can be provided orally or in writing?

A

Material conflicts of interest

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5
Q

For financial advice what is the only thing that must be provided in writing

A

Privacy policy

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6
Q

What must you do to address incomplete information

A

If unable to obtain info necessary to fulfill scope of engagement, limit it to the services you are able to provide or terminate the engagement

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7
Q

What is the difference between qualitative and quantitative?

A

Qualitative- subjective information

Quantitative- objective information

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8
Q

What does the code of standards section state in regard to implementation of recommendations?

A

You are responsible for implementing the clients financial planning recommendations unless specifically excluded from the scope of engagement

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9
Q

What does the code or standards state about monitoring clients recommendations?

A

You are responsible for monitoring and updating the clients financial planning recommendations unless specifically excluded from the scope of engagement

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10
Q

Define the fiduciary duty

A

At all times when providing financial advice to a client, a CFP professional must act as a fiduciary and act in the best interest of the client

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11
Q

What is the duty of loyalty

A
  • place interests of client above my and my firms interests
  • avoid or fully disclose conflicts of interest and obtain consent from client
  • act without regard to interests of myself and my firm
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12
Q

What is the duty of care

A
  • act with the care, skill, prudence, and diligence that a prudent professional would exercise in light of clients goals, risk tolerance, objectives, and financial and personal circumstances
  • comply with all objectives, policies, restrictions and other terms of engagement
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13
Q

Is capacity for risk a qualitative or quantitative example and why?

A

Quantitative

This describes how much risk a client NEEDS to take to reach their goals

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14
Q

CFP Code of ethics

A
  • act with honesty, integrity, competence and diligence
  • act in the clients best interest
  • exercise due care
  • avoid or disclose and manage conflicts of interest
  • maintain the confidentiality and protect the privacy of client information
  • act in a manner that reflects positively on the financial planning profession
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15
Q

What is the duty to follow the clients instructions

A

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

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16
Q

What is not considered financial advice?

A
  • communication that would not be viewed as a recommendation
  • responses to direct orders
  • marketing materials
  • general financial education and communications
17
Q

Is the determination of whether financial advice has been provided objective or subjective?

A

Objective

18
Q

What is acceptable documentation

A

CRM software
Handwritten notes
Emails

19
Q

Standards of conduct

A
  • duties owed to clients
  • financial planning and application of the practice standards for the financial planning process
  • practice standards for financial planning process
  • duties owed to firms and subordinates
  • duties to the CFP board
  • prohibition on circumvention
20
Q

What is prohibition on circumvention

A

CFP professional may not do indirectly or through or by another person or entity any act or thing that the code of standards prohibits the CFP from doing

21
Q

Define CFP professional firms

A

Any entity on behalf of which a CFP professional provides professional services to a client that has the authority to exercise control over the CFP professionals activities

22
Q

Define conflict of interest

A

-when a CFP professionals interests are adverse to the CFP professionals duties to a client

Or

-when a CFP professional has duties to one client that are adverse to another client

23
Q

Define control

A

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

24
Q

Define engagement

A

An oral or in writing, arrangement, or understanding

25
Q

Define financial planning

A

A collaborative process that helps maximize a clients potential for meeting life goals through financial advice that integrates relevant elements of the clients personal and financial circumstances

26
Q

Define material

A

Information is material when a reasonable client or prospective client would consider the information important in make a decision

27
Q

Define professional services

A

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

28
Q

What are the types of related parties

A

Family members

Business entities

29
Q

What are the duties owed to a client

A
  • fiduciary duty
  • integrity
  • competence
  • diligence
  • disclose/manage conflicts of interest
  • sound/objective professional judgement
  • professionalism
  • comply with the law
  • confidentiality/privacy
  • provide info to a client
  • duties when communicating with a client
  • duties when representing compensation
  • duties when recommending an additional person
  • duties when recommending technology
  • refrain from borrowing, lending, commingling assets
30
Q

Duties owed to firm and subordinates

A

Use reasonable care when supervising

Comply with lawful objectives of CFP professionals firm

Provide notice of public discipline

31
Q

Duties owed to CFP board

A

Definitions

Refrain from adverse conduct

Reporting

Provide narrative statement

Cooperation

Compliance with terms and conditions

32
Q

What is a narrative statement

A

Written notice that accurately and completely describes the material facts and the outcome or status of a reportable matter

33
Q

When is a rule violation designated as minor

A

When sanction imposed is a fine of $2,500 or less and the sanctioned person does not contest the fine

34
Q

What is a relevant misdemeanor?

A

Criminal offense, that is not a felony, for conduct involving:

Fraud, theft, misrepresentation, or other dishonest conduct, crimes of moral turpitude, violence or a second or more alcohol/drug offense

35
Q

What is a felony

A

A felony offense, or for jurisdictions that do not differentiate between a felony and a misdemeanor of an offense punishable by:

One year of imprisonment or
Fine at least $1,000

36
Q

What is the expectation in regard to updating material information/change

A

Material changes and updates to public disciplinary history or bankruptcy must be disclosed to the client within 90 days with relevant webpages

37
Q

Are you required to comply with the practice standards for financial planning process if the client does not agree to engage?

A

No

38
Q

When must the CFP act as a fiduciary?

A

When providing financial advice

39
Q

Do you need to give your client a copy of form ADV?

A

Yes, during the first step of the financial planning process

CFP (10 decks)

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