Ethics and Standards Flashcards
Code of Ethics Principals
IOCFCPD
- Integrity
- Objectivity
- Competence
- Fairness
- Confidentiality
- Professionalism
- Diligence
Integrity
- Honesty and candor
- allows for innocent error and legitimate difference of opinion
- no misleading advertising or representation of authority
- no misrepresentation about anything to anyone or any body
- act in accordance with governing legal docs when dealing with funds/property
- keep records
- promptly deliver funds to their intended place
- do not commingle funds unless legal and disclosed
- use fiduciary standard with client funds
Objectivity
- Intellectual honesty and impartiality
- avoid subordination of judgement
- exercise reasonable and prudent professional judgement
- act in client’s interest
Competence
- wisdom to recognize knowledge
- limitations CE requirements = 30 hrs. every 2 years incl. at least 2 in ethics
Fairness
- Disclosures offered annually - COI, compensation structure
- Compensation fair and reasonable
- Form ADV may suffice as disclosure
- as an employee, perform services with dedication
- disclose outside affiliations, changes to CFP status, change of employment
- outside business engagements with clients should be fair and reasonable
Confidentiality
Do not disclose client info except:
- As necessary in the course of business
- In the course of legal process
- In a civil dispute with the client
- To defend against charge of wrongdoing
- As necessitated by employer obligation
Professionalism
- use marks in compliance w/CFP rules
- respect other professionals
- inform CFP board of other CFP’s transgression (not related to legal process and only if known and not in breach of confidentiality)
- report illegal conduct in company
- obey laws/regulations
- don’t engage in conduct that reflects poorly on profession
- register as RIA if required; no RIA after name
- only offer services qualified to offer
- return records in timely manner
- don’t harrass other CFPs
- comply w/CFP renewal requirements
Diligence
- Only enter engagement if services are warranted and can provide them
- Only make suitable recommendations
- make reasonable investigation into financial products
- Render services in prompt and thorough manner
- Proper and supervision of subordinates
Rules of Conduct
DIPOOO
- Defining the relationship with the prospective clients or client
- Information disclosed to prospective clients and clients
- Prospective client and client information and property
- Obligations to prospective clients and clients
- Obligations to employers
- Obligations to the CFP Board
Rule 1: Defining the relationship with the prospective clients or clients
- 1 Mutually agree on services
- 2 If financial planning, disclose obligations of each party with regard to EGADIM
- 3 Written agreement, PTSD: Parties, Terms under which agreement terminated, Services provided, Date and Duration
- 4 Always put clients needs first; if planning must do what’s BEST for client (fiduciary duty)
Rule 2: Information disclosed to prospective clients or clients
- 1 Never lie
- 2 Disclose orally (if not planning) or in writing (if planning), 4 C’s: Compensation, Conflicts of interest, Contact information, Certificant’s areas of expertise
Must disclose changes to above in a timely fashion
Rule 3. Prospective client and client information and property (10)
3.1 Treat information as confidential except:
- As necessary in the course of business
- In the course of legal process
- In a civil dispute with the client
- To defend against charge of wrongdoing
- As necessitated by employer obligation
- 2 Take prudent steps to protect info
- 3 Must obtain nec. info to do job. If can’t, change scope of work or terminate
- 4 Clearly identify assets to take over
- 5 Keep clear records
- 6 Do not borrow $ unless: family member or in business of loaning $.
- 7 Do not lend $ unless: family member or in business of loaning $
- 8/3.9 Do not commingle funds unless: allowed by law, explicitly outlined to clients
- 10 Return clients property in a timely manner
Treat information as confidential except:
- As necessary in the course of business
- In the course of legal process
- In a civil dispute with the client
- To defend against charge of wrongdoing
- As necessitated by employer obligation
Rule 4. Obligations to potential client or clients (7)
- 1 Treat clients fairly and with objectivity and integrity
- 2 Only offer advice in areas of competence
- 3 Comply with regulatory requirements
- 4 Reasonable and prudent judgement
- 5 make and/or implement only suitable recs.
4.6 provide reasonable and prudent supervision of subordinates/3rd parties
4.7 advise clients of any suspension/revocation
Rule 5: Obligations to Employers (2)
- 1 Perform professional services with dedication to the lawful objectives of the employer/principal and in accordance with CFP Board’s Code of Ethics
- 2 Advice employer of suspension/revocation
Rule 6: Obligations to the CFP Board (5)
- 1 Use marks properly, comply with professional requirements
- 2 meet requirements, including CE (30 incl 2 ethics every 2 yrs.)
- 3 Notify of change in contact info w/in 45 days
- 4 Notify in writing if convicted of any crime w/in 10 days of conviction
- 5 Do not engage in conduct that reflects poorly on profession
Always bar list
- felony conviction of theft of funds or other financial crimes
- felony conviction of violent crime within the last 5 years
- felony conviction of tax fraud
- revocation of other financial license
- felony conviction of murder/rape
Presumed Bar List
- 2 or more bankrupcies
- revocation or suspension of non-financial license
- felony conviction of nonviolent crime w/in last 5 years
- suspension of financial license
- felony conviction of violent crime (other than murder/rape) more than 5 years ago
Forms of Discipline
- Private censure
- Public admonition
- Suspension of CFP up to 5 years
- Revocation of CFP
20 days to respond to complaint; 30 days to appeal decision
Practice Standard 100-1: Defining the scope of the engagement
mutually define
- define services to be provided
- cover disclosures (4 C’s, PTSD)
- establish engagement duration
- add’l info to limit/define
Practice Standard 200-1 Determining client’s personal and financial goals, needs and priorities (gathering client data)
Goals:
- consistent w/client’s values/attitudes
- provide focus, purpose, direction
- clear measurable objectives
- assist in recognizing unrealistic goals
- limited by client disclosure
Practice Standard 200-2: Obtaining Quant info and documents (gathering client data)
- obtained directly from client or other sources (interviews, questionnaires, etc)
- communicate accuracy imperative
- if unable to get sufficient data:
- restrict scope of work
- terminate engagement
- communicate limitations on scope
Practice standard 300-1: Analyzing and evaluating client info (Analyze and evaluate client’s financial status)
- analyze info to gain understanding of financial situation and to what extent goals, needs and objective can be met by resources and current course of action
- use client-specified, mutually agreed up assumptions
- personal: retirement age, life expectancy, income needs, risk factors, time horizon, special needs
- economic: interest, inflation rate, tax rate, investment returns
- Determine strengths/weaknesses of current situation; restrict scope if necessary
Practice Standard 400-1: Identifying and Evaluating Financial Planning Alternatives (Developing and presenting financial planning recommendations
- Consider sufficient and relevent alternatives to client’s current course of action to meet goals, needs and priorities
- Take into account legal and regulatory limitations and areas of competency
- more than one alternative may reasonably meet the client’s needs
Practice Standard 400-2: Developing the financial planning recommendations (Developing and presenting the financial planning recommendations)
Recommendations consistent with and affected by:
- mutually defined scope of engagement
- mutually defined goals, needs and priorities
- quantitative data
- personal and economic assumptions
- analysis and eval. of clients current situation
- alternatives selected by practitioner
May recommend to keep current course of action
May be necessary for client to revise a goal
Practice Standard 400-3: Presenting financial planning recommendations (Developing and presenting financial planning recommendations)
- assist client in understanding current situation, recommendation, and its impact on ability to meet goals, priorities and objectives
- don’t present opinion as fact
- communicate factors critical to understanding, incl:
- assumptions
- interdependence of recommendations
- advantages and disadvantages
- risks
- time sensitivity
- new COI
Practice Standard 500-1: Agreeing on implementation responsibilities (Implementing the financial planning recommendations)
- mutually agree on responsibilities
- client can accept/reject
- any remaining disclosures (4 C’s)
- referrals if necessary
- if planner engaged to implement, agree on scope of engagement orally or in writing
Practice Standard 500-2: Selecting prodicts and services for implementation (Implementing the financial planning recommendations)
- select appropriate products/services
- investigate products/services that reasonably meet needs
- must be suitable to financial situation and consistent w/goals, needs, priorities
- use professional judgement and qualitative and quant. info to select products in client’s best interest
Practice Standard 600-1: Defining monitoring responsibilities (Monitoring)
Mutually define monitoring responsibilities:
- clarify practitioner responsibilities
- explain what monitored, frequency, and communication about
- monitoring may cause reinitiation of planning process
- modify scope if needed
