FUND CH16 Ethics Flashcards
Certified Financial Planner Board of
Standards, Inc. 5 different categories:
o Code of Ethics and Professional Responsibility (“Code of Ethics”)
o Rules of Conduct
o Practice Standards
o Disciplinary Rules
o Candidate Fitness Standards
Certified Financial Planner Board of
Standards, Inc.
The CFP Board has placed the highest ethical and
professional standards upon CFP® certificants and
Professionals Eligible for Reinstatement* (formerly
registrants).
• * An individual not currently certified, has been certified by CFP Board in the past and has an entitlement to potentially use the CFP® marks.
CFP Licensee Duties and Responsibilities
4 Categorie
- To the Profession
- to the Employer
- To the Clients
- To Prospective Clients
Principles
“I can obtain CFP Designation”
- I - Integrity
- C - Competence
- O - Objectivity
- C - Confidentiality
- F - Fairness
- P - Professionalism
- D- Diligence
Integrity
Integrity demands honesty and candor which must not be subordinated to personal gain and advantage
Objectivity
- Objectivity requires intellectual honesty and impartiality.
- Certificants should protect the integrity of their work,
maintain objectivity and avoid subordination of their
judgment.
Competence
Maintain the knowledge and skill necessary to provide professional services competently (not expert level)
- Competence means attaining and maintaining an adequate level of knowledge and skill, and application of that knowledge and skill in providing services to clients.
- Competence also includes the wisdom to recognize the limitations.(ex. bring attorney for complex estate planning)
Fairness
• Be fair and reasonable in all professional relationships.
Disclose conflicts of interest
• Fairness requires impartiality, intellectual honesty and disclosure of material conflicts of interest.
Confidentiality
• Protect the confidentiality of all client information.
Professionalism
- Act in a manner that demonstrates exemplary professional conduct.
- Certificants cooperate with fellow certificants to enhance and maintain the profession’s public image and improve the quality of services.
o Use marks appropriately
— CFP®, CERTIFIED FINANCIAL PLANNER™ (ALL
CAPS)
— Followed by: professional, certificant or practitioner
—Do NOT use as part of email or website address
Diligence
- Provide professional services diligently.
- Provide services in a reasonably prompt and thorough manner.
Rules of Conduct six different categories:
o Defining the relationship with a prospective client or client
o Information disclosed to prospective clients and clients
o Prospective client and client information and property
o Obligations to prospective clients and clients
o Obligation to employers
o Obligations to CFP Board
Keys Points
- Distinguish Financial Planning from more limited engagement
- Understand the effect on (higher) Duty of Care and Disclosures
- Understand the Practice Standards for Financial
Planning engagements
Rules of Conduct Definition of ‘Financial Planning’
o Providing material elements of the financial planning process (the 6 steps in the Practice Standards)
o The process of determining whether and how an individual can meet life goals through the proper management of financial resources
o Both the duty of care and disclosure requirements are more stringent for financial planning engagements than for limited engagements
o When in doubt, embrace the fiduciary standard of care and comply with the written disclosure requirements
- Must consider the total client relationship
- May be Financial Planning even if only one subject area (ex. comprehensive retirement plan)
- 4 considerations to determine financial planning
Four Considerations to determine if Financial Planning:
- The client’s understanding and intent in engaging the certificant.
- The degree to which multiple financial planning subject areas are involved (generally, two or more).
- The comprehensiveness of data gathering.
- The breadth and depth of recommendations.
Defining the Relationship with the Prospective Client or Client
- 1.1 mutually agree upon the services
- 1.2 prior to entering into an agreement, (oral or written PRIOR)
a. The obligations and responsibilities of each party
b. Compensation that any party any legal affiliate
c. Terms …offer proprietary products.
d. Terms …use other entities
• 1.3 Financial planning? WRITTEN agreement
PTSD parties, termination terms, services, date, duration, Form ADV
• 1.4 Fiduciary if Financial Planning - interest of client first at all times, best available options, proprietary product limitation must be disclosed in writing
Summary of Distinctions
Not Financial Planning
duty of care- clients interest first
disclosure- compensation, conflicts, material info, contact info, ORAL OR WRITTEN
if Financial Planning
duty of care- FIDUCIARY- BEST interest of client , Practice Standard
disclosure- compensation, conflicts, material info, contact info, WRITTEN (PTSD)
- Information Disclosed To Prospective Clients and Clients
- 2.1 do not lie! abt professional qualifications or services, benefits of products, or omit facts
- 2.2 a. disclose compensation (certificant and/or employer and other sources of compensation)
dollar amount does not have to be disclosed (unless requested by the client), but the sources and calculation of compensation are required.
b. conflicts of interest
c. personal info (ex. bankruptcys)
d. contact info
e. if financial planning
- Prospective Client and Client Information and Property
- 3.1 A confidential except: legal process (ex. subpoena), employer or partners, defend charges of wrongdoing or civil dispute, needed to perform the services
- 3.2 phsical and electronic info
- 3.3 obtain info necessary and inform if there are material deficiencey for assesment - and modify agreement accordingly
- 3.4 A identify and supervise assets, keep complete records
- 3.6 borrower nor lender be…to client - exception is immediate family, institution
- 3.8/9 Do not commingle client property with self/employer other clients property - unless permitted by law or written permission (ex. hedge funds do that all the time) keep track! sufficient record keeping
- 3.10 return client property in timely manner- or agreed time frame
- Obligations to Prospective Clients and Clients
- 4.1 A treat prospective clients and clients fairly and provide professional services with integrity and objectivity.
- 4.2 offer advice only in those areas in which competent and maintain competence
- 4.3 compliance with applicable regulatory requirements
- 4.4 A reasonable and prudent professional judgment
- 4.5 suitable recommendations
- 4.6 supervision to subordinate third party
- 4.7 advise of any certification suspension or revocation from CFP board
- Obligations To Employers
- 5.1 dedication to the lawful objectives of the employer/principal and in accordance with CFP Board’s Code of Ethics.
- 5.2 advise his or her current employer/principal of any certification suspension or revocation he or she receives from CFP Board.
- Obligations to CFP Board
• 6.1 abide by the terms of all agreements with
CFP Board, using the CFP® marks, trademark and
professional review operations and requirements.
- 6.2 continuing education requirements-30 hours every two years, including 2 hours of ethics
- 6.3 contact info , address within 45 days
- 6.4 convictions of a crime , suspensions within 30 days
- 6.5 conduct (ex. facebook)
Description of Practice Standards
level of professional practice expected
mandatory
• The purpose of the practice standards is to:
o Establish the level
o Advance professionalism
o Enhance the value
Candidate Fitness Standards and
Unacceptable conduct that will Always Bar an individual from becoming certified
ensure specific character and fitness standards as to an individual’s conduct before certification
ALWAYS BAR:
o Felony conviction for theft, embezzlement or other financially based crimes, tax fraud or other tax-related crimes, murder or rape,__violent crime within the last five years (ex. DUI)
o Revocation of a financial professional license, unless revocation was administrative in nature
