Ethics Flashcards
When is Fiduciary Duty required?
when providing financial advice
Components of Fiduciary Duty
- Duty of Loyalty
- Duty of Care
- Duty to Follow Client Instruction
Components of Duty of Loyalty
- Place the interest of the Client above the Professional and the Firm
- Avoid or disclose and manage Conflicts of Interest
- Act without regard to the interests of anyone other than the Client
Options when the CFP Professional is not sufficiently competent in a particular area to provide Services
- Gain competence
- Obtain assistance from a competent professional
- Limit or terminate the Engagement
- Refer the Client to a competent professional
Duty of Diligence involves providing Professional Services by
- responding to reasonable client inquiries
- in a timely and thorough manner
Duty of Professionalism
Treating others with dignity, courtesy, and respect
When a CFP professional will disclose confidential information
- For ordinary business purposes (client consent, client’s other professionals, CFP’s other professionals, and a client appointed representative)
- For legal and enforcement purposes (law compliance, investigation compliance, claim compliance, CFP Board compliance, or professional organizations)
Material changes, disciplinary history, or bankruptcy information must be disclosed to the client with a specific time period
90 days
Duties regarding technology selection, use, and recommendation
- Exercise reasonable care and judgement
- Have a reasonable level of understanding
- Have a reasonable basis for believing that technology produces reliable, objective, and appropriate outcomes
The exceptions for borrowing/lending money
- Family members
- The lender is in the business of legally lending money
Definition of financial planning
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
Factors that will determine whether a CFP professional has agreed to provide FA that requires FP
- # of relevant elements of the client’s personal and financial circumstances it may affect
- portion and amount of assets the FA may affect
- length of time the client’s personal and financial circumstances may be affected
- effect on the client’s overall exposure to risk
- barriers to modification once implemented
Options if the CFP professional must comply with the Practice Standards but the Client does not agree to engage the CFP professional to provide Financial planning
- Not enter the Engagement
- Limit the Scope of the Engagement (to services that do not require the Practice Standards) and describe the services that will not be performed
- Provide the requested services after informing the Client how FP would benefit them and how the decision may limit the CFP’s FA (CFP does not need to comply)
- Terminate the Engagement
What to consider when developing a FP recommendation
- assumptions and estimates
- basis for making the recommending, including how it is designed to meet client goals, effects, and how it integrates elements of the client’s circumstances
- timing and priority
- if the recommendation is independent or must be implemented with something else
Time requirement for notice to CFP Board for engaging in adverse conduct
30 days
Identify the steps in the Financial Planning process
- Understanding the Client’s Personal and Financial Circumstances
- Identifying and Selecting Goals
- Analyzing the Client’s Current Course of Action and Potential Alternative Course(s) of Action
- Developing the Financial Planning Recommendation(s)
- Presenting the Financial Planning Recommendation(s)
- Implementing the Financial Planning Recommendation(s)
- Monitoring Progress & Updating
Role of the CFP Board Counsel
Has the authority to investigate and file a Complaint against a Respondent for alleged violations of the Code of Ethics and Standards of Conduct
Role of the Disciplinary & Ethics Committee
the DEC has the authority to issue a final order that finds facts, determines whether a violation has occurred, and, where appropriate, imposes discipline in the form of a sanction.
Composition of the DEC
Composed of CFP® professionals and members of the public
Composition of the Hearing Panel
3+ people, mostly CFP Professionals and majority DEC members. (1 DEC member must be Chair)
Purpose of the Hearing panel
to conduct the disciplinary hearing and issue a recommendation to the DEC
time for respondent to answer a CFP Board Counsel complaint
30 days
time for respondent to pay the Hearing/Settlement Review Fee or request a waiver/reduction
30 days
time for hearing documents, statements, and stipulations
45 days after complaint
