Professional Conduct Flashcards
When is a CFP held to the Fiduciary Standard?
When providing financial advice
What are the three duties under Fiduciary Duty?
Duty of Loyalty
Duty of Care
Duty to Follow Client Instructions
Which standard of conduct involves responding in a timely and thorough manner?
Diligence
Which standard of conduct involves treating clients, professionals, and others with dignity, courtesy, and respect?
Professionalism
What does sales-related compensation include? List some examples.
Commissions, Trailing Commissions, 12b-1 fees, spreads, transaction fees, revenue sharing, solicitor or referral fees, etc.
What does sales related-compensation not include?
-Soft dollars
-Reasonable & Customary Fees (for custodial services)
-Non-monetary benefits
-Reasonable & Customary Fees (for professional services)
-Trivial economic benefit
What do you do if the Client doesn’t agree to engage you for Financial Planning?
Choices Include:
* Not enter into the Engagement
* Limit the Scope of Engagement to services that do not require application of the Practice Standards and describe to the Client the services the Client requests that the CFP® professional will
not be performing
* Provide the requested services after informing the Client how FP will benefit the Client and how the decision not to enter into an FP engagement may limit the Financial Advice
* Terminate the Engagement.
What standard provides that a CFP may not do indirectly, or through or by another person, any act or thing that the Code of Standards prohibits the CFP from doing directly?
Prohibition on Circumvention
(Section F)
What are the integration factors used to determine whether CFP has provided financial advice that requires financial planning?
-# of relevant elements that the advice may affect
-portion and amount of clients assets that advice may affect
-length of time client’s circumstances may be affected
-effect on client’s overall exposure to risk
-barriers to modifying actions taken to implement the advice
Examples of Qualitative Information
NOTE: think subjective
health, life expectancy, family circumstances, values, attitudes, expectations, earnings potential, risk tolerance, goals, needs, priorities, current course of action
Examples of Quantitative Information
NOTE: think objective
age, dependents, other advisors, income, expenses, cash flow, savings, assets, liabilities, available resources, liquidity, taxes, EE benefits, gov’t benefits, insurance coverage, estate plans, education, retirement accounts and benefits, capacity for risk
What standard is an IAR held to?
Fiduciary
The Commission can order a suspension (Article 11.1 Sanctions) for a specific period of time, not to exceed _____ years.
5 years
