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Flashcards in Ethics and Standards Deck (29)
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1

Code of Ethics Principals

IOCFCPD

  • Integrity
  • Objectivity
  • Competence
  • Fairness
  • Confidentiality
  • Professionalism
  • Diligence

2

Integrity

  • Honesty and candor
  • allows for innocent error and legitimate difference of opinion
  • no misleading advertising or representation of authority
  • no misrepresentation about anything to anyone or any body
  • act in accordance with governing legal docs when dealing with funds/property
  • keep records
  • promptly deliver funds to their intended place
  • do not commingle funds unless legal and disclosed
  • use fiduciary standard with client funds

3

Objectivity

  • Intellectual honesty and impartiality
  • avoid subordination of judgement
  • exercise reasonable and prudent professional judgement
  • act in client's interest

4

Competence

  • wisdom to recognize knowledge
  • limitations CE requirements = 30 hrs. every 2 years incl. at least 2 in ethics

5

Fairness

  • Disclosures offered annually - COI, compensation structure
  • Compensation fair and reasonable
  • Form ADV may suffice as disclosure
  • as an employee, perform services with dedication
  • disclose outside affiliations, changes to CFP status, change of employment
  • outside business engagements with clients should be fair and reasonable

6

Confidentiality

Do not disclose client info except:

  • As necessary in the course of business
  • In the course of legal process
  • In a civil dispute with the client
  • To defend against charge of wrongdoing
  • As necessitated by employer obligation

7

Professionalism

  • use marks in compliance w/CFP rules
  • respect other professionals
  • inform CFP board of other CFP's transgression (not related to legal process and only if known and not in breach of confidentiality)
  • report illegal conduct in company
  • obey laws/regulations
  • don't engage in conduct that reflects poorly on profession
  • register as RIA if required; no RIA after name
  • only offer services qualified to offer
  • return records in timely manner
  • don't harrass other CFPs
  • comply w/CFP renewal requirements

8

Diligence

  • Only enter engagement if services are warranted and can provide them
  • Only make suitable recommendations
  • make reasonable investigation into financial products
  • Render services in prompt and thorough manner
  • Proper and supervision of subordinates

9

Rules of Conduct

DIPOOO

1. Defining the relationship with the prospective clients or client

2. Information disclosed to prospective clients and clients

3. Prospective client and client information and property

4. Obligations to prospective clients and clients

5. Obligations to employers

6. Obligations to the CFP Board

10

Rule 1: Defining the relationship with the prospective clients or clients

1.1 Mutually agree on services

1.2 If financial planning, disclose obligations of each party with regard to EGADIM

1.3 Written agreement, PTSD: Parties, Terms under which agreement terminated, Services provided, Date and Duration

1.4 Always put clients needs first; if planning must do what's BEST for client (fiduciary duty)

11

Rule 2: Information disclosed to prospective clients or clients

2.1 Never lie

2.2 Disclose orally (if not planning) or in writing (if planning), 4 C's: Compensation, Conflicts of interest, Contact information, Certificant's areas of expertise

Must disclose changes to above in a timely fashion

12

Rule 3. Prospective client and client information and property (10)

3.1 Treat information as confidential except:

  • As necessary in the course of business
  • In the course of legal process
  • In a civil dispute with the client
  • To defend against charge of wrongdoing
  • As necessitated by employer obligation

3.2 Take prudent steps to protect info

3.3 Must obtain nec. info to do job. If can't, change scope of work or terminate

3.4 Clearly identify assets to take over

3.5 Keep clear records

3.6 Do not borrow $ unless: family member or in business of loaning $.

3.7 Do not lend $ unless: family member or in business of loaning $

3.8/3.9 Do not commingle funds unless: allowed by law, explicitly outlined to clients

3.10 Return clients property in a timely manner

13

Treat information as confidential except:

 

  • As necessary in the course of business
  • In the course of legal process
  • In a civil dispute with the client
  • To defend against charge of wrongdoing
  • As necessitated by employer obligation

14

Rule 4. Obligations to potential client or clients (7)

4.1 Treat clients fairly and with objectivity and integrity

4.2 Only offer advice in areas of competence

4.3 Comply with regulatory requirements

4.4 Reasonable and prudent judgement

4.5 make and/or implement only suitable recs.

4.6 provide reasonable and prudent supervision of subordinates/3rd parties

4.7 advise clients of any suspension/revocation

15

Rule 5: Obligations to Employers (2)

5.1 Perform professional services with dedication to the lawful objectives of the employer/principal and in accordance with CFP Board’s Code of Ethics

5.2 Advice employer of suspension/revocation

16

Rule 6: Obligations to the CFP Board (5)

6.1 Use marks properly, comply with professional requirements

6.2 meet requirements, including CE (30 incl 2 ethics every 2 yrs.)

6.3 Notify of change in contact info w/in 45 days

6.4 Notify in writing if convicted of any crime w/in 10 days of conviction

6.5 Do not engage in conduct that reflects poorly on profession

17

Always bar list

  • felony conviction of theft of funds or other financial crimes
  • felony conviction of violent crime within the last 5 years
  • felony conviction of tax fraud
  • revocation of other financial license
  • felony conviction of murder/rape

18

Presumed Bar List

  • 2 or more bankrupcies
  • revocation or suspension of non-financial license
  • felony conviction of nonviolent crime w/in last 5 years
  • suspension of financial license
  • felony conviction of violent crime (other than murder/rape) more than 5 years ago

19

Forms of Discipline

  • Private censure
  • Public admonition
  • Suspension of CFP up to 5 years
  • Revocation of CFP

20 days to respond to complaint; 30 days to appeal decision

20

Practice Standard 100-1: Defining the scope of the engagement

mutually define

  • define services to be provided
  • cover disclosures (4 C's, PTSD)
  • establish engagement duration
  • add'l info to limit/define

21

Practice Standard 200-1 Determining client's personal and financial goals, needs and priorities (gathering client data)

Goals:

  • consistent w/client's values/attitudes
  • provide focus, purpose, direction
  • clear measurable objectives
  • assist in recognizing unrealistic goals
  • limited by client disclosure

22

Practice Standard 200-2: Obtaining Quant info and documents (gathering client data)

  • obtained directly from client or other sources (interviews, questionnaires, etc)
  • communicate accuracy imperative
  • if unable to get sufficient data:
    • restrict scope of work
    • terminate engagement
    • communicate limitations on scope

23

Practice standard 300-1: Analyzing and evaluating client info (Analyze and evaluate client's financial status)

  • analyze info to gain understanding of financial situation and to what extent goals, needs and objective can be met by resources and current course of action
  • use client-specified, mutually agreed up assumptions
    • personal: retirement age, life expectancy, income needs, risk factors, time horizon, special needs
    • economic: interest, inflation rate, tax rate, investment returns
  • Determine strengths/weaknesses of current situation; restrict scope if necessary

24

Practice Standard 400-1: Identifying and Evaluating Financial Planning Alternatives (Developing and presenting financial planning recommendations

  • Consider sufficient and relevent alternatives to client's current course of action to meet goals, needs and priorities
  • Take into account legal and regulatory limitations and areas of competency
  • more than one alternative may reasonably meet the client's needs

25

Practice Standard 400-2: Developing the financial planning recommendations (Developing and presenting the financial planning recommendations)

Recommendations consistent with and affected by:

  • mutually defined scope of engagement
  • mutually defined goals, needs and priorities
  • quantitative data
  • personal and economic assumptions
  • analysis and eval. of clients current situation
  • alternatives selected by practitioner

May recommend to keep current course of action

May be necessary for client to revise a goal

26

Practice Standard 400-3: Presenting financial planning recommendations (Developing and presenting financial planning recommendations)

  • assist client in understanding current situation, recommendation, and its impact on ability to meet goals, priorities and objectives
  • don't present opinion as fact
  • communicate factors critical to understanding, incl:
    • assumptions
    • interdependence of recommendations
    • advantages and disadvantages
    • risks
    • time sensitivity
  • new COI

27

Practice Standard 500-1: Agreeing on implementation responsibilities (Implementing the financial planning recommendations)

  • mutually agree on responsibilities
  • client can accept/reject
  • any remaining disclosures (4 C's)
  • referrals if necessary
  • if planner engaged to implement, agree on scope of engagement orally or in writing

28

Practice Standard 500-2: Selecting prodicts and services for implementation (Implementing the financial planning recommendations)

 

  • select appropriate products/services
  • investigate products/services that reasonably meet needs
  • must be suitable to financial situation and consistent w/goals, needs, priorities
  • use professional judgement and qualitative and quant. info to select products in client's best interest

29

Practice Standard 600-1: Defining monitoring responsibilities (Monitoring)

Mutually define monitoring responsibilities:

  • clarify practitioner responsibilities
  • explain what monitored, frequency, and communication about
  • monitoring may cause reinitiation of planning process
  • modify scope if needed