Duties Owed to Clients

Question 1

Duty of Loyalty

Answer 1

CFP must:
-place interest of client above firm
-avoid conflicts of interest & disclose Material Conflicts of Interest
-act without regard to the financial/other interest of CFP professional, which means a CFP acting under a Conflict of Interest continues to have the duty to act in the best interest of client.

Question 2

Duty of Care

Answer 2

a CFP must:
act with the care, skill, prudence and diligence that a professional would in light of the Client’s goals, rusk, objectives etc

Question 3

Duty to Follow Client Instructions

Answer 3

A CFP must:
comply with the terms of the Client engagement and follow all directions of the client that are reasonable and lawful

Question 4

Integrity

Answer 4

demands honesty and candor, allowance for innocent error
may not: scheme or defraud, make untrue statements or omit material facts.

Question 5

Competence

Answer 5

When not sufficiently competent in particular area the CFP must gain competence, obtain the assistance of competent professional, limit or terminate engagement or give client a referral to competent professional

Question 6

Diligence

Answer 6

must provide professional services including responding to reasonable Client inquires in a timely and thorough manner

Question 7

Disclose and Manage Conflicts of Interest

Answer 7

CFP must make full disclosure of all material conflicts of interest that could affect relationship, must provide facts that a client can understand and give consent or reject. written consent is not required, can be oral

Question 8

Sound and Objective Professional Judgement

Answer 8

Must exercise professional judgment on behalf of the client and may not solicit or accept any gift that could be expected to compromise integrity

Question 9

Professionalism

Answer 9

Treat clients, prospective clients and other professionals with dignity, courtesy and respect.

Question 10

Comply with the Law

Answer 10

Must comply with the laws, rules and regulations governing professional services Intentional violation is not permitted

Question 11

Confidentiality and Privacy

Answer 11

Must keep confidential and not disclose any nonpublic information about prospective, current or past clients. For business reasons: may disclose with the client’s consent, to another firm or professional providing services for the client, attorney, accountants etc., or while representing the client. For legal reasons: law enforcement suspecting unlawful activity, summons, against civil claims, request from CFP board concerning investigation,
Firm and/or CFP must take steps to protect client information and privacy

Question 12

Provide Information to Client (financial advise)

Answer 12

Financial Advise: (that doesn’t including Planning): description of services, payment, compensation, any public bankruptcy disclosed within 90 days, conflict of interest, confidentiality, disclose information for professional referrals, material information

Question 13

Provide Information to Client (financial planning)

Answer 13

Same as financial advise plus the terms of engagement with CFP/firm, scope of engagement, on going updates and material changes

Question 14

Communicating With a Client

Answer 14

Communicate accurate information in a manner that the client can reasonably understand

Question 15

Representing Compensation Methods

Answer 15

Fee only: no sales related compensation for any service
Fee based: fees and commission
Sales Related Compensation: any bonus or portion compensation from buying or selling certain assets, client referrals, soft dollars, non-monetary benefits, solicitor fees

Question 16

Recommending, Engaging, and working with additional persons

Answer 16

CFP must have reasonable basis for the recommendation based on experience, rep. and qualifications disclose to the client any arrangement for compensation, exercise reasonable care to protect client’s interest
When working on client behalf: communicate with other provider about scope of services and inform client in a timely manner if providers services were not performed within scope

Question 17

Selecting, using, and recommending technology

Answer 17

use reasonable care and judgment when using technology in a planning, it must produce reliable, objective and appropriate outcomes,

Question 18

Refrain from borrowing or lending money, comingling assests

Answer 18

May not directly or indirectly borrow or lend money to clients UNLESS: client is a member of the CFP’s family, the lender is a business organization or legal entity in the business of lending money

Question 19

Unacceptable Conduct

Answer 19

Felony conviction related to finance, tax, violent crime
Revocation of a financial professional licenses

Question 20

Conduct Presumptive Bar

Answer 20

2 or more personal bankruptcies ** tested
revocation or suspension of non-financial professional licenses
suspension of financial licenses** tested
felony conviction of violent crimes or conviction for crimes more than 5 years ago

Question 21

Adverse Conduct

Answer 21

customer complaints, employer investigations and firings
arbitrations & other civil proceedings
felony convictions of nonviolent crimes more than 5 years ago
misdemeanor convictions

Question 22

CFP Board Counsel DEC & Panel

Answer 22

C- Investigate & file complaints
D-authority to issue final order
P-conducts hearing

Question 23

CFP Hearing Steps

Answer 23

Complaint Delivered
Respondent acknowledge investigation within 14 days
Respondent Answers in 30 days & pays fees
Documents submitted no less than 60 days before review date
Notice of hearing given no less than 30 days before
Hearing before Panel
Panel gives recommendations
DEC reviews recommendation
DEC final order
Appeal can be filed within 30 days of final order