General Principles Flashcards
Code of Ethics
- Honesty, Integrity, Competence, Diligence
- Act in Client’s Best Interest
- Exercise Due Care
- Avoid/Disclose Material Conflicts of Interest
- Maintain Confidentiality/Privacy
- Reflect Positively on CFP Certification and Profession
Financial Planning
Definition
A collaborative process that helps maximize a client’s potential for meeting life goals through financial advice that integrates relevant elements of the client’s personal and financial circumstances
Standards of Conduct:
Duties Owed to Firms and Subordinates
- Use reasonable care when supervising
- Comply with lawful objectives of their firm
- Promptly advise their firm, in writing, of any public discipline imposed by CFP Board
Standards of Conduct:
Duties Owed to CFP Board
- May not engage in adverse conduct
- Must provide written notice within 30 calendar days after engaging in adverse conduct
Fiduciary Standard
3 Parts
- Duty of Loyalty
- Duty of Care
- Duty to Follow Client Instructions
Fiduciary Standard:
Duty of Loyalty
- Place the interest of the client above the interests of the firm
- Avoid conflicts of interest, or fully disclose, obtain the client’s consent, and properly manage the conflict
- Act without regard to the financial or other interests of the CFP, the CFP’s firm, or any individual or entity other than the client
Fiduciary Standard:
Duty of Care
Act with the care, skill, prudence, and diligence that a prudent professional would exercise in light of the client’s goals, objectives, etc.
At all times when providing ________ ________ to a client, a CFP must act as a fiduciary.
Financial Advice
Required to be provided to the client in writing
Privacy policy
Conflicts of Interest can be delivered to the client…
In writing or orally
Material changes and disciplinary actions/bankruptcy must be reported to clients within ____ days.
90
Compensation Methods
- Fee-Only
- Fee-Based
- Sales-Related Compensation
Exceptions to the Restrictions on Borrowing/Lending
- Member of the family
- Lender is in the money lending business
Practice Standards:
The Financial Planning Process
“Ukuleles In A Divebar Playing Iron Maiden”
- Understand the client’s personal and financial circumstances
- Identifying and Selecting Goals
- Analyzing the Client’s Current & Alternate Courses of Action
- Develop Recommendations
- Present Recommendations
- Implement Recommendations
- Monitor Progress & Update
The Financial Planning Process:
Step 1: Understanding the Client’s Circumstances
- Obtain quantitative and qualitative information
- Analyze information
- Address incomplete information
The Financial Planning Process:
Step 2: Identifying and Selecting Goals
- Identify potential goals
- Help the client select and prioritize goals
- Discuss unrealistic goals
- All selected goals must be prioritized
The Financial Planning Process:
Step 3: Analyzing The Client’s Current and Alternate Courses of Action
- Analyze the client’s current course of action
- Analyze potential alternative courses of action
The Financial Planning Process:
Step 4: Develop Recommendations
The CFP must consider:
- Assumptions and estimates used to develop the recommendations
- Basis for making the recommendation
- Timing and priority of the recommendation
- Whether the recommendation is independent or must be implemented with another recommendation
The Financial Planning Process:
Step 5: Present Recommendations
- Present to the client the selected recommendations and information that was required to consider when developing the recommendations
The Financial Planning Process:
Step 6: Implement Recommendations
- Address implementation responsibilities
- Identify, analyze, and select actions, products, and services
- Recommend one or more actions, products, and services for implementation
- Select and implement actions, products, or services
The Financial Planning Process:
Step 7: Monitor Progress and Update
- Establish monitoring and updating responsibilities
- Monitor the client’s progress at appropriate intervals
- Obtain current qualitative and quantitative information
- Update goals, recommendations, or implementation decisions
Fitness Standards:
Conduct Deemed Unacceptable
Results in a permanent bar
- Felony: theft, embezzlement, other financial crimes
- Felony: tax fraud or other tax-related crimes
- Revocation of a financial professional license (unless administrative in nature)
- Felony: murder, rape
- Felony: violent crime in the last 5 years
Fitness Standards:
Conduct Deemed a Presumptive Bar
Must petition the Disciplinary and Ethics Committee (DEC)
- Two or more personal or business bankruptcies
- Revocation/Suspension of a non-financial professional license (unless administrative in nature)
- Suspension of a financial professional license (unless administrative in nature)
- Felony: non-violent crimes within the last 5 years
- Felony: violent crimes (other than murder or rape) over 5 years ago
Who has the authority to investigate and file a complaint against a respondent for alleged violations of the Code of Ethics and Standards of Conduct?
CFP Board Counsel
The Disciplinary and Ethics Committee (DEC) has the authority to…
- issue a final order that finds facts
- determines whether a violation has occurred
- imposes discipline in the form of a sanction, where appropriate
The Disciplinary and Ethics Committee (DEC) is made up of…
CFP professionals and members of the public
A respondent has ____ days to answer to the CFP Board Counsel after a complaint.
30
The Hearing Panel conducts the hearing and consists of _____ people.
3
Forms of Discipline
- Private censure
- Public letter of admonition
- Suspension
- Revocation
Suspension of CFP Marks: Minimum: __________ Maximum: __________
90 days; 5 years
