LO 1.1.2: Determine whether a financial planner-client relationship constitutes financial planning as stated in the CFP Board Code of Ethics and Standards of Conduct

Question 1

Financial Planning

Answer 1

A collaborative process

Helps maximize a Client’s potential for meeting life goals through Financial Advice

Integrates relevant elements of the Client’s personal and financial circumstances

Question 2

Financial Advice

Answer 2

• 1. Financial Advice is a Communication that would reasonably be viewed as a recommendation on the particular course of action with respect to
• • dev or impl of a financial plan;
• • value of investing in, purchasing, holding, or selling financial assets;
• • investment policies or strategies, portfolio composition, and the management of financial assets; and
• • selection and retention of other persons to provide services to the client
• 2. the exercise of Discretionary authority over financial assets of a client

Question 3

What is not financial advice

Answer 3

Financial Advice is not responses to directed orders

A reasonable CFP pro would not view the following as Financial Advice:

• Marketing materials
• General financial education
• General financial communications

Question 4

How does a planner know if they are providing financial advice

Answer 4

The more customized communications to client’s individual situation, greater likelihood Financial Advice is being provided.

Question 5

What are the 3 questions to verify that the client and planner are involved in a Financial Planning engagement

Answer 5

• 1. Has the planner agreed to provide or already provided Financial Planning?
• 2. Does the client have a reasonable basis to believe that the planner will provide or has provided Financial Planning?
• 3. Does the Financial Advice provided require integration of relevant elements of the client’s personal and financial circumstances to act in the client’s best interests, taking into account those integration factors?
• • Yes = confirmation Financial Planning is taking place. Ask the 3 questions, if yes, follow the 7 steps.

Question 6

Relevant elements

Answer 6

the relevant elements of financial planning are incorporated into the financial planning process when financial planning takes place.

Question 7

Integration factors

Answer 7

integration factors are variables that weigh in determining whether Financial Advice requires Financial Planning.

Question 8

What do integration factors include

Answer 8

• 1. Number of relevant elements
• 2. Portion and Amt of Financial Assets affected
• 3. Length of time client’s engagement w/us and circumstances may be affected
• 4. Effect on the client’s overall exposure to risk if implements the financial advice
• 5. Barriers to modifying the actions taken to implement the financial advice (if significant time and effort, requires financial planning as well)

Question 9

If after determining Financial Advice requires Financial Planning, and client does not agree to move forward with Financial Planning Services, what does the planner do

Answer 9

• 1. The planner may provide requested services after informing client how they will benefit, and consequences of not entering into planning engagement may limit the advice.
• 2. The planner may not enter into the engagement.
• 3. The planner may limit the scope of engagement to services that do not require financial planning.
• 4. The planner may terminate the engagement.

Question 10

What elements of the Code and Standards must be applied at all times in the client-planner relationship

Answer 10

• 1. Code of Ethics

* 2. Standards of Conduct

Question 11

What elements of the Code and Standards must be applied when providing Financial Advice in the client-planner relationship

Answer 11

• 1. Code of Ethics
• 2. Standards of Conduct
• 3. Fiduciary duty
• 4. Managing conflicts of interest (don’t have to adhere to practice standards)

Question 12

What elements of the Code and Standards must be applied when Financial Advice requires Financial Planning and the client engages –

Answer 12

• 1. Code of Ethics
• 2. Standards of Conduct
• 3. Fiduciary duty
• 4. Managing conflicts of interest
• 5. Practice Standards for the Financial Planning Process