Ethics

Question 1

What are the duties of the fiduciary duty

Answer 1

Duty of loyalty
Duty of care
Duty to follow clients instructions

Question 2

What is the duty of care?

Answer 2

Act with care, skill, prudence, and filling ends that a prudent professional would exercise in light of clients goals, risk tolerance, but objectives, and financial and personal circumstances

Question 3

Definition of a client

Answer 3

Any person (natural person, business organization, legal entity) to whom the CFP professional provides professional services pursuant to an engagement

Question 4

For financial planning what is the only thing that can be provided orally or in writing?

Answer 4

Material conflicts of interest

Question 5

For financial advice what is the only thing that must be provided in writing

Answer 5

Privacy policy

Question 6

What must you do to address incomplete information

Answer 6

If unable to obtain info necessary to fulfill scope of engagement, limit it to the services you are able to provide or terminate the engagement

Question 7

What is the difference between qualitative and quantitative?

Answer 7

Qualitative- subjective information

Quantitative- objective information

Question 8

What does the code of standards section state in regard to implementation of recommendations?

Answer 8

You are responsible for implementing the clients financial planning recommendations unless specifically excluded from the scope of engagement

Question 9

What does the code or standards state about monitoring clients recommendations?

Answer 9

You are responsible for monitoring and updating the clients financial planning recommendations unless specifically excluded from the scope of engagement

Question 10

Define the fiduciary duty

Answer 10

At all times when providing financial advice to a client, a CFP professional must act as a fiduciary and act in the best interest of the client

Question 11

What is the duty of loyalty

Answer 11

• place interests of client above my and my firms interests
• avoid or fully disclose conflicts of interest and obtain consent from client
• act without regard to interests of myself and my firm

Question 12

What is the duty of care

Answer 12

• act with the care, skill, prudence, and diligence that a prudent professional would exercise in light of clients goals, risk tolerance, objectives, and financial and personal circumstances
• comply with all objectives, policies, restrictions and other terms of engagement

Question 13

Is capacity for risk a qualitative or quantitative example and why?

Answer 13

Quantitative

This describes how much risk a client NEEDS to take to reach their goals

Question 14

CFP Code of ethics

Answer 14

• act with honesty, integrity, competence and diligence
• act in the clients best interest
• exercise due care
• avoid or disclose and manage conflicts of interest
• maintain the confidentiality and protect the privacy of client information
• act in a manner that reflects positively on the financial planning profession

Question 15

What is the duty to follow the clients instructions

Answer 15

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

Question 16

What is not considered financial advice?

Answer 16

• communication that would not be viewed as a recommendation
• responses to direct orders
• marketing materials
• general financial education and communications

Question 17

Is the determination of whether financial advice has been provided objective or subjective?

Answer 17

Objective

Question 18

What is acceptable documentation

Answer 18

CRM software
Handwritten notes
Emails

Question 19

Standards of conduct

Answer 19

• duties owed to clients
• financial planning and application of the practice standards for the financial planning process
• practice standards for financial planning process
• duties owed to firms and subordinates
• duties to the CFP board
• prohibition on circumvention

Question 20

What is prohibition on circumvention

Answer 20

CFP professional may not do indirectly or through or by another person or entity any act or thing that the code of standards prohibits the CFP from doing

Question 21

Define CFP professional firms

Answer 21

Any entity on behalf of which a CFP professional provides professional services to a client that has the authority to exercise control over the CFP professionals activities

Question 22

Define conflict of interest

Answer 22

-when a CFP professionals interests are adverse to the CFP professionals duties to a client

Or

-when a CFP professional has duties to one client that are adverse to another client

Question 23

Define control

Answer 23

The power, directly or indirectly, to direct the management or policies of the entity at the relevant time, through ownership, by contract, or otherwise

Question 24

Define engagement

Answer 24

An oral or in writing, arrangement, or understanding

Question 25

Define financial planning

Answer 25

A collaborative process that helps maximize a clients potential for meeting life goals through financial advice that integrates relevant elements of the clients personal and financial circumstances

Question 26

Define material

Answer 26

Information is material when a reasonable client or prospective client would consider the information important in make a decision

Question 27

Define professional services

Answer 27

Financial advice and related activities and services that are offered or provided including but not limited to financial planning, legal, accounting or business planning services

Question 28

What are the types of related parties

Answer 28

Family members Business entities

Question 29

What are the duties owed to a client

Answer 29

- fiduciary duty - integrity - competence - diligence - disclose/manage conflicts of interest - sound/objective professional judgement - professionalism - comply with the law - confidentiality/privacy - provide info to a client - duties when communicating with a client - duties when representing compensation - duties when recommending an additional person - duties when recommending technology - refrain from borrowing, lending, commingling assets

Question 30

Duties owed to firm and subordinates

Answer 30

Use reasonable care when supervising Comply with lawful objectives of CFP professionals firm Provide notice of public discipline

Question 31

Duties owed to CFP board

Answer 31

Definitions Refrain from adverse conduct Reporting Provide narrative statement Cooperation Compliance with terms and conditions

Question 32

What is a narrative statement

Answer 32

Written notice that accurately and completely describes the material facts and the outcome or status of a reportable matter

Question 33

When is a rule violation designated as minor

Answer 33

When sanction imposed is a fine of $2,500 or less and the sanctioned person does not contest the fine

Question 34

What is a relevant misdemeanor?

Answer 34

Criminal offense, that is not a felony, for conduct involving: Fraud, theft, misrepresentation, or other dishonest conduct, crimes of moral turpitude, violence or a second or more alcohol/drug offense

Question 35

What is a felony

Answer 35

A felony offense, or for jurisdictions that do not differentiate between a felony and a misdemeanor of an offense punishable by: One year of imprisonment or Fine at least $1,000

Question 36

What is the expectation in regard to updating material information/change

Answer 36

Material changes and updates to public disciplinary history or bankruptcy must be disclosed to the client within 90 days with relevant webpages

Question 37

Are you required to comply with the practice standards for financial planning process if the client does not agree to engage?

Answer 37

No

Question 38

When must the CFP act as a fiduciary?

Answer 38

When providing financial advice

Question 39

Do you need to give your client a copy of form ADV?

Answer 39

Yes, during the first step of the financial planning process