Unit 7 - Professional Conduct and Fiduaciary Responsibility

Question 2

Define a Financial Planning Engagement

Answer 2

Exists whenever a certificant peforms any tyoe of mutually agreed upon financial planning service for a client. In most cases the CFP and client will specify the financial services to be provided in writing.

Question 3

Items that the CFP board says can be disclosed in writing or verbally

Answer 3

1. The obligation and responsibilites of each party to the agreement.
2. Information regarding compensation that any party to the agreement or any legal affiliate to a party under the agreement wii or could received under the agreement.
3. Terms under which the agreement permits the certificant to offer proprietary products. 4. Terms under which the certicicant will use other entities to meet any fo the agreements obligations.

Question 4

Items that the CFP board requires to be in writing

Answer 4

1. The parties to the agreement
2. The date and duration of the agreement.
3. How and on what terms each party can end the agreement.
4. The services to be provided under the agreement.
5. A precise and understandable description of compensation arrangements being offered.
6. A Summary of likely conflicts of interest between the client and the certificant, certificants employer and any third parties.
7. Contact information for the certificant and if applicable the certificants employer.

Question 5

Define a “Fiduciary”.

Answer 5

Someone who acts in the utmost good faith, in a manner he or she believes to be in the best interest of the client.

Question 6

Examples of fiduciary relationships

Answer 6

• Agent/Broker and principal
• Trustee and beneficiary
• investment advisor and client
• board of directors and company/shareholders

Question 7

Define a CFP certificant and a CFP registrant

Answer 7

A CFP certicicant is and individual who is currently certified by the CFP board. A CFP registrant include people who are not currently certified but have been certified in the past and are pontentially entitled to use the CFP marks.

Question 8

What are the CFP Boards Standards of Professional Conduct sections?

Answer 8

1. Code of Ethics and Professional Responsibility
2. Rules of Conduct
3. Financial Planning Practice Standards
4. Disciplinary Rules and Procedures.
5. Candidate Fitness Standards

Question 9

Define Code of Ethics and Professional Responsibility

Answer 9

These are general statements expressing the ethical and professional ideals certificants are expectd to display in their professional activities. They are aspirational in nature and provide a source of guidance.

Question 10

Rules of Conduct

Answer 10

These establish the high standards of expected certificants. They are binding on all certificants regardless of their title, position, type of employment, or method of compensation and they govern anyone who has the right to use the CFP mark, whether or not those marks are actually used. Violations may be subject to certificant discipline.

Question 11

Financial Planning Practice Standards

Answer 11

These establish the level of professional practice required of certificants engaged in financial planning.

Question 12

Disciplinary Rules and Procedures

Answer 12

These are the rules and procedures CFP board follows when enforcing the Rules of Conduct and Practice Standards.

Question 13

Candidate Fitness Standards

Answer 13

These apply to candidates for certification and are designed to ensure that a candidate’s conduct does not adversly reflect on her fitness for certification upon the profession or the CFP certification marks.

Question 14

Name the Seven Principles included in the Code of Ethics and Professional Responsibility.

Answer 14

Remember CFP CODI

1. Integrity
2. Objectivity
3. Competence
4. Fairness
5. Confidentiality
6. Professionaism
7. Diligence

Question 15

Define the Principle - Integrity

Answer 15

Integrity demands honesty and candor which must not be subordinated to personal gain and advantage. CFP Certificants must be truthful and open with clients. They must put the clients interests ahead of there own.

Question 16

Define the Principle - Objectivity

Answer 16

Objectivity requires honesty and impartiality. Regardless of the particular service rendered or the capacity in which a certificant functions, certificanst should -protect the integrity of there work -maintain objectivity -avoid subordination of their judgement.

Question 17

Define the principle - competence

Answer 17

Competence means attaining an maintaining an adequate level of knowledege and skill. Competence also means recognizing the limitations of that knowledge and know when to consult other professionals for the benefit of the client.

Question 18

Define the principle - Fairness

Answer 18

Be fair and responsible in all professional relationships, disclose material or potential material conflicts of interest. Treat others as you would like to be treated.

Question 19

Define the principle - Confidentiallity

Answer 19

Confidentiallity means ensuring that the information is accessible only to those autorized to have access.

Question 20

Define the principle - Professionalism

Answer 20

Professionalism requires behaving with dignity and courtesy to clients, fellow professionals, and others in business related activities.

Question 21

Define the principle - Diligence

Answer 21

Profvide professional services diligently which includes bing prompt, being thorough and proper planning for and supervision of the rendering of professional services.

Question 22

List the forms of discipline ofr any CFP under the CFP boards Disciplinary Rules and Procedures

Answer 22

1. Private Censure by letter of reprimand.
2. Public Letter of admonition.
3. Suspension of the rights to use the CFP marks for a specified period of time.
4. Permanent revocation of the rights to use the CFP marks.

Question 23

Financial Planning Practice Standards (Practice Standards)

Answer 23

• Establish the level of professional practice that is expected of certificants engaged in financial planning
• Are authoritive and provide financial planners with directions.
• Used by CFP Boards’s Disciplinary and Ethics Commission and Appeals Committee to evaluate a certificants conduct and determine if the Rules of Conduct have been violated, based on the Board of Disciplinary Rules established by CFP Board.