Fundamentals of Financial Planning Flashcards
fiduciary duty
duty of loyalty, duty of care, follow client instructions
integrity
honesty, upstanding, candor
competence
relevantly apply knowledge
gain knowledge, obtain assistance, limit scope, or refer if competence is lacking
diligence
timely, thorough
disclose and manage conflicts of interest
consent does not need to be in writing
ambiguity on side of client
assume financial conflicts are material
material conflict of interest
one that could influence client decision or cause substantial harm
sound and objective professional judgment
do not accept or solicit gifts that could influence CFP judgment
professionalism
dignity, courtesy, respect
comply with the law
avoid intentionally or recklessly violating laws, rules, regulations, standards
can apply to making poor referrals
confidentiality and privacy
consent, ordinary business, legal and enforcement purposes, policies
no absolute confidentiality
provide information to a client
financial advice, financial planning
communicating with a client
ensure client understanding
consider multiple forms of communication
duties with representing compensation
fee-only, fee-based, sales related compensation, soft dollars, non-monetary benefits, related party
recommending, engaging, and working with additional persons
reasonable basis, reputation, experience, qualifications, disclosure, reasonable care
selecting and using technology
reasonable care and judgment, level of understanding
refrain from borrowing/lending money and commingling
client lending/borrowing generally prohibited- exception family members and if the cfp is in the business of lending/borrowing
duty of loyalty
cfp professional must put the interest of the client ahead of their own, avoid conflicts of interest/fully disclose material conflicts/obtain client consent, act without regard to the financial or other interests of cfp
duty of care
cfp must act with the care, skill, prudence, and diligence that a prudent professional would exercise in light of the client’s situation and goals
duty to follow client instructions
cfp must comply with all objectives, policies, restrictions, and other terms of the engagement and all reasonable/lawful directions of the client
financial planning practice standards
Understand the client’s personal and financial circumstances
Identify and select goals
Analyze client’s current course of action and potential alternative course(s) of action
Develop financial panning recommendation(s)
Present the recommendations
Implement the recommendations
Monitor progress and updating
RIA must register with state
RIA must register with SEC
> $110M under management
RIA can register with either SEC or state, their choice
$100M-$110M under management
Investment Advisors Act of 1940 definition of investment advisor
someone who in the BUSINESS of providing ADVICE about securities for COMPENSATION (abc)
Form to register with SEC
Form ADV
Form to withdraw registration with SEC
Form ADV-W
Form ADV part 1
contains investment business, ownership, clients, employees, business practices, affiliations, and disciplinary events of the advisors or employees
RIA must electronically file annually within 90 days of fiscal year end
Form ADV part 2
contains advisor’s fees, compensation, education, investment objectives, conflicts of interest, and the background of advisory personnel
required to be written in plain english
must be promptly updated if any information becomes materially inaccurate, otherwise changes may be made annually
Form ADV part 3
CRS
provides succinct information to a retail investor about the relationship and service the firm offers
