Financial Planning Practice Standards Flashcards
What are the practice standards intended to do?
- 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
Practice Standards 100 Series
Establishing and defining the relationship with the client
100_1
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.
100_1 Relationship with Code of Ethics and Rules of Conduct
Principle’s 4 & 7
Rules: 1.1, 1.2, 1.3, and 2.2
Practice Standards 200 Series
Gathering Client Data
200_1
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
200_1 Relationship with Code of Ethics and Rules of Conduct
Principle 7
Rules 3.3, 4.4, and 4.5
200_2
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.
200_2 Relationship with Code of Ethics and Rules of Conduct
Principle 7
Rules 3.3, 4.4, and 4.5
Practice Standards 300 Series
Analyzing and Evaluating The Clients Financial Status
300_1
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.
300_1 Relationship with Code of Ethics and Rules of Conduct
Principles 2, 3, 7
Rules 1.4, 4.1, 4.4, and 4.5
Practice Standards 400 Series
Developing and Presenting the Financial Planning Recommendations
- what is possible?
- what is recommended?
- How is it presented?
400_1
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.
400_1 Relationship with Code of Ethics and Rules of Conduct
Principles 2,3,6,7
Rules 1.4, 4.1, and 4.5
400_2
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
400_2 Relationship with Code of Ethics and Rules of Conduct
Principles 2,3,6,7
Rules 1.4, 4.1, and 4.5
400_3
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.
400_3 Relationship with Code of Ethics and Rules of Conduct
Principles 1,2,6
Rules 2.1, 4.1, 4.4, and 4.5
Practice Standards 500 Series
Implementing the Financial Planning Recommendations
500_1
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.
500_1 Relationship with Code of Ethics and Rules of Conduct
Principles 3, 4, 6, 7
Rules 1.2, 2.2, 4.1, and 4.4
500_2
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
500_2 Relationship with Code of Ethics and Rules of Conduct
Principles 2, 4, 6, 7
Rules 1.2, 1.4, 2.2, 4.1, 4.4, and 4.5
Practice Standards 600 Series
Monitoring
600_1
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.
600_1 Relationship with Code of Ethics and Rules of Conduct
Principle 7
Rules 1.2, 3.3, 3.4, and 4.1
