Financial Planning Practice Standards Flashcards
When during the client relationship must you disclose how you handle NPPI?
At the time of engagement and ANNUALLY unless certain exceptions apply
If you refer a client to someone else, what is important to disclose?
If you’re receiving compensation from the referral
Can you use multiple written documents to disclose information to clients?
Yes it doesn’t have to be all in one document
Who does the CFP board have authority over?
Just the CFP not the broker dealer or hedge fund etc.
Are CFP standards meant to supercede state and local law?
No
Implementing the plan involves which of the following:
Identifying activities necessary for imp.
Selecting Products and Services
Referring to Other Professional
Coordinating with Other Professionals
All of the above.
What is a part of the implementation step you may forget?
Referring to and Coordinating with other Professionals
How many financial planning subject areas included in the scope of engagement?
One or more.
Mutually defining the scope of engagement serves to what
Set realistic expectations for client and you
Does the scope of engagement need to be in writing?
No - but there may be certain disclosures that need to be in writing
You and client mutually decide scope of engagement when
BEFORE any financial planning service is provided
When do you gather client data?
AFTER defining the scope of the engagement and BEFORE analyze and evaluate client financial status
Gathering client data
You and the client will mutually define clients personal and financial goals, needs and priorities that are relevant to the scope of the engagement before any recommendation is made and/or implemented
What is gathering client data essentially?
Mutually define clients personal and financial goals, needs and priorities
Financial goals, needs and priorities are affected by the clients what
values, attitudes, expectations and time horizons
Where would obtaining quantitative information and documents fall in the planning process?
Gathering client data
What are some ways you can gather quantitative information and documents?
From the client directly or other sources such as interviews, questionnaires, and client records and documents
While gathering client information/documents, what is important to communicate to the client?
accuracy and completeness
If you cannot obtain sufficient and relevant quantitative information/documents, what are your 2 options
1.restrict the scope of the engagement to the matters you do have documents for
2. terminate the engagement
Analyzing and evaluating the clients financial status defined as
ANALYZE the information to gain an understanding of the clients situation THEN
EVALUATE to what extent the clients goals can be met by the clients resources and current course of action
When might you consider personal and economic assumptions?
Analyzing and Evaluating clients financial status
What are some personal assumptions you might consider when analyzing and evaluating a clients financial status
retirement age, life expectancy, income needs, risk factors, time horizon, and special needs
What are some economic assumptions you might consider when analyzing and evaluating a clients financial status 3 things
inflation rates, tax rates, investment returns
First step in Developing and Presenting Recommendations
Identifying and evaluating ALTERNATIVES
Second step in Developing and Presenting Recommendations
Develop the financial planning recommendations
Third step in Developing and Presenting Recommendations
Presenting the recommendations
Before you develop the financial planning recommendations you need to do what
identify and evaluate alternatives to their current course of action
Implementing the financial planning recommendations involves what
-IDENTIFY activities necessary for implementation
-DETERMINE division of activities between you and client
-REFER to other professionals
-COORDINATE with other professionals
-SHARING information as authorized
-SELECTING and securing products and services
When you’re presenting recs (step 4), what are some factors you should communicate? (what would effect the recs?)
-personal and economic assumptions
-interdependence of recommendations
-advantages and disadvantages
-risks
-time sensistivity
Financial Planning Process
Establish and define the relationship
Gathering client data
Analyzing and Evaluating client financial status
Developing and Presenting recs
Implementing the recs
Monitoring
What is step one of the process
Establish and define the relationship
What is step 2 of the process
Gathering client data
What is step 3 of the process
Analyzing and evaluating clients financial status
What is step 4 of the process
Developing and presenting financial planning recommendations
What is step 5 of the process
Implementing the recommendations
What is step 6 of the process
Monitoring
Monitoring is what step of the process
Step 6 the last step
Implementing the recommendations is what step of the process
Step 5
Developing and presenting recommendations is what step of the process
Step 4
Analyzing and Evaluating client financial status is what step of the process
Step 3
Gathering client data is what step of the process
Step 2
Defining the scope of the engagement is what step of the process
Step 1
What question to ask when analyzing current course of action?
Does it maximize the clients financial potential
When developing recs, consider 4 things
- assumptions and estimates used
-basis for making the rec and anticipated effects on the client
-timing and priority of the rec - is the rec independent or implemented with other recs
What to consider re:monitoring
-which actions/products are OUTSIDE THE SCOPE of monitoring
- how and WHEN monitoring takes place
-client will inform if MATERIAL CHANGES take place
- CFPs responsibility to update and HOW/WHEN updates take place
When must you monitor client progress? How Often?
At appropriate intervals
When would you update goals/recs/implementing decisions?
when you have responsibility, and circumstances warrant
Who could you potentially borrow or lend money to?
-if the client is a family member
-if the lender is a business in the business of lending
When referring someone, what factors into the referral?
The other persons reputation, experience and qualifications
Do you have to have written consent to a conflict of interest?
No
Is having discretionary authority over clients financial assets considered advice?
Yes
Is providing brokerage services or insurance product providing advice?
No
Clients responsibility to inform of changes in qualitative/quantitative info
Establish monitoring and updating responsibilities
If you have responsibility, when must you update goals, recs, implementing decisions
If circumstances warrant changes update according to practice standards
When would monitoring cease?
If you have responsibility, when the engagement is terminated
Where would clients responsibility to inform you of changes fall?
Establish monitoring and updating responsibilities
When would you discuss any selection that deviates from your recommendation?
Implementing the recs
When would you discuss with the client the basis for selecting product, timing and priority, and describe and COI
Implementing the recommmedations
