Financial Planning Practice Standards

Question 1

What are the practice standards intended to do?

Answer 1

• Assure that the practice of financial planning by CFP professionals is based on established norms of practice
• advance professionalism in financial planning, and
• enhance the value of the financial planning process

Question 2

Practice Standards 100 Series

Answer 2

Establishing and defining the relationship with the client

Question 3

100_1

Answer 3

Defining the scope of the engagement

• mutually define the scope of the engagement before any financial planning services are provided.
• identify the services to be provided
• disclose material conflicts of interests
• disclose compensation arrangements
• determine client and practitioner’s responsibilities
• establish the duration of the engagement
• provide any additional information necessary to define or limit the scope.

Question 4

100_1 Relationship with Code of Ethics and Rules of Conduct

Answer 4

Principle’s 4 & 7

Rules: 1.1, 1.2, 1.3, and 2.2

Question 5

Practice Standards 200 Series

Answer 5

Gathering Client Data

Question 6

200_1

Answer 6

Determining a Client’s Personal and Financial Goals, Needs and Priorities

• mutually define the client’s personal and financial goals, needs and priorities that are relevant to the scope of the engagement before any recommendation is made and/or implemented.
• the practitioner will need to explore the clients values, attitudes, expectations, and time horizon (qualitative information)
• Goals and objectives provide focus, purpose, vision and direction for the financial planning process

Question 7

200_1 Relationship with Code of Ethics and Rules of Conduct

Answer 7

Principle 7

Rules 3.3, 4.4, and 4.5

Question 8

200_2

Answer 8

Obtaining Quantitative Information and Documents

• practitioner shall obtain sufficient quantitative information and documents about the client relevant to the scope of the engagement before any recommendation is made and/or implemented.
• Communicate to the client the importance of complete and accurate information as it will impact conclusions and recommendations.
• If unable to get sufficient information the practitioner may: restrict the scope of the engagement or terminate the engagement.

Question 9

200_2 Relationship with Code of Ethics and Rules of Conduct

Answer 9

Principle 7

Rules 3.3, 4.4, and 4.5

Question 10

Practice Standards 300 Series

Answer 10

Analyzing and Evaluating The Clients Financial Status

Question 11

300_1

Answer 11

Analyzing and Evaluating the Client’s Information

• analyze the data to get an understanding of the client’s current financial situation and then evaluate to what extent the client’s goals, needs and priorities can be met by the client’s resources and current course of action.
• Use client specified, mutually agreed upon, and/or reasonable assumptions
• form the foundation for the strengths and weaknesses of the client’s current financial situation and current course of action.

Question 12

300_1 Relationship with Code of Ethics and Rules of Conduct

Answer 12

Principles 2, 3, 7

Rules 1.4, 4.1, 4.4, and 4.5

Question 13

Practice Standards 400 Series

Answer 13

Developing and Presenting the Financial Planning Recommendations

• what is possible?
• what is recommended?
• How is it presented?

Question 14

400_1

Answer 14

Identifying and Evaluating Financial Planning Alternatives

• consider sufficient and relevant alternatives to the client’s current course of action in an effort to reasonably meet the client’s goals, needs and priorities.
• evaluation may involve considering multiple assumptions, conducting research or consulting with other professionals.
• take into account your level of competency in properly addressing each of the clients financial planning issues.

Question 15

400_1 Relationship with Code of Ethics and Rules of Conduct

Answer 15

Principles 2,3,6,7

Rules 1.4, 4.1, and 4.5

Question 16

400_2

Answer 16

Developing the Financial Planning Recommendations\

• develop recommendations based on the selected alternative(s) and the current course of action in an effort to reasonably meet the client’s goals, needs and priorities.
• recommendation will be consistent with and will directly affect the following:
  
  • Scope of the engagement
  • Client goals, needs and priorities
  • Quantitative data provided by the client
  • personal and economic assumptions
  • practitioners analysis and evaluation of current situation
  • alternative(s) selected by the practitioner

Question 17

400_2 Relationship with Code of Ethics and Rules of Conduct

Answer 17

Principles 2,3,6,7

Rules 1.4, 4.1, and 4.5

Question 18

400_3

Answer 18

Presenting the Financial Planning Recommendation(s)

• communicate the recommendation(s) in a manner and to an extent reasonably necessary to assist the client in making an informed decision.
• avoid presenting the practitioners opinion as fact
• communicate to the client that their goals, needs and priorities, changes in economic conditions can all alter the outcome.

Question 19

400_3 Relationship with Code of Ethics and Rules of Conduct

Answer 19

Principles 1,2,6

Rules 2.1, 4.1, 4.4, and 4.5

Question 20

Practice Standards 500 Series

Answer 20

Implementing the Financial Planning Recommendations

Question 21

500_1

Answer 21

Agreeing on the Implementation Responsibilities

• mutually agree on the implementation consistent with the scope of the engagement
• the client is responsible for accepting or rejecting recommendations and for retaining and/or delegating implementation responsibilities
• The original scope of the relationship may need to be modified
• when referring the client to other professionals or advisors, the planner shall indicate the basis on which the practitioner believes the other professional or advisor may be qualified.

Question 22

500_1 Relationship with Code of Ethics and Rules of Conduct

Answer 22

Principles 3, 4, 6, 7

Rules 1.2, 2.2, 4.1, and 4.4

Question 23

500_2

Answer 23

Selecting the Products and Services for Implementation

• the practitioner shall select the appropriate products and services that are consistent with the clients goals, needs and priorities.
• the practitioner uses professional judgement in selecting products and services

Question 24

500_2 Relationship with Code of Ethics and Rules of Conduct

Answer 24

Principles 2, 4, 6, 7

Rules 1.2, 1.4, 2.2, 4.1, 4.4, and 4.5

Question 25

Practice Standards 600 Series

Answer 25

Monitoring

Question 26

600_1

Answer 26

Defining Monitoring Responsibilities

• mutually define the monitoring responsibilities
• clarify the role if any that the practitioner will have in the monitoring process
• the monitoring process may reveal the need to re initiate steps to the financial planning process and the current scope may need to be modified.

Question 27

600_1 Relationship with Code of Ethics and Rules of Conduct

Answer 27

Principle 7

Rules 1.2, 3.3, 3.4, and 4.1