Certified Financial Planner (CFP) Professional Conduct, Regulation, and the Financial Planning Process Syllabus

Professional Conduct, Regulation, and the Financial Planning Process syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Professional Conduct, Regulation, and the Financial Planning Process in Certified Financial Planner (CFP), not a summary of it.

1. 1

   CFP Board Standards and Code of Ethics

   5 topics

   • Code of Ethics Principles
     • Integrity, objectivity, and competence
     • Fairness, confidentiality, and professionalism
     • Diligence and acting with prudence
   • Fiduciary Duty Standard
     • Duty of loyalty
     • Duty of care
     • Duty to follow client instructions
   • Duties Owed to Clients
     • Disclosure and management of conflicts of interest
     • Providing information to clients
     • Sound and objective professional judgment
   • Duties Owed to Firms and the Public
   • Material Conflicts of Interest Disclosure
2. 2

   Financial Planning Practice Standards

   4 topics

   • Seven-Step Financial Planning Process
     • Understanding circumstances and identifying goals
     • Analyzing current course of action
     • Developing and presenting recommendations
     • Implementing and monitoring recommendations
   • Scope of Engagement and Client Agreements
   • Financial Planning vs. Financial Advice Determination
   • Documentation and Recordkeeping Requirements
3. 3

   Regulation of Financial Planners and Advisers

   4 topics

   • Investment Advisers Act of 1940
     • Definition of investment adviser and exclusions
     • Form ADV and disclosure brochure
     • State vs. SEC registration thresholds
   • Securities Regulation Framework
     • Securities Act of 1933 and 1934
     • FINRA and broker-dealer oversight
   • Consumer Protection and Privacy Laws
     • Regulation S-P and Gramm-Leach-Bliley
     • FCRA and identity theft protection
   • CFP Board Disciplinary Process and Sanctions
4. 4

   Financial Planning Foundations

   4 topics

   • Client and Planner Attitudes, Values, and Biases
     • Behavioral finance heuristics
     • Risk tolerance assessment
   • Principles of Communication and Counseling
   • Financial Planning Subject Areas Integration
   • Ethical Decision-Making Frameworks

Professional Conduct, Regulation, and the Financial Planning Process flashcards for Certified Financial Planner (CFP)

22 of 50 cards from the Professional Conduct, Regulation, and the Financial Planning Process deck — real questions with worked answers.

1. What are the seven Code of Ethics principles a CFP professional must uphold?

   Act with (1) honesty, integrity, competence, and diligence; (2) in the client's best interests; (3) exercise due care; (4) avoid or disclose and manage conflicts of interest; (5) maintain confidentiality and protect client privacy; (6) act in a manner reflecting positively on the profession; and (7) comply with the CFP Board's Code and Standards.

2. When does the CFP Board's fiduciary duty (Duty of Loyalty, Duty of Care, Duty to Follow Client Instructions) apply?

   At all times when providing Financial Advice to a Client, a CFP professional must act as a fiduciary and therefore in the best interests of the Client.

3. What three component duties make up the CFP Board's fiduciary duty?

   (1) Duty of Loyalty — place the client's interests first, avoid/disclose-and-manage conflicts, act without regard to the firm's or professional's financial interests; (2) Duty of Care — act with the care, skill, prudence, and diligence a prudent professional would; (3) Duty to Follow Client Instructions — comply with all objectives, policies, restrictions, and lawful directions of the client.

4. Under the Duty of Loyalty, when a conflict of interest cannot be avoided, what must a CFP professional do?

   Fully disclose the material conflict, obtain the client's informed consent, and properly manage the conflict so that the client's interests still come first.

5. List several specific Duties Owed to Clients beyond the core fiduciary duty.

   Integrity, competence, diligence, disclosing and managing conflicts of interest, sound and objective professional judgment, professionalism, complying with the law, confidentiality and privacy, providing information to the client, duties when selecting/using/recommending technology, refraining from borrowing/lending money with a client, and the duty to comply with scope-of-engagement obligations.

6. What is the standard for a CFP professional's 'sound and objective professional judgment'?

   The professional must exercise professional judgment that is not subordinated to the interests of the CFP professional or any other person, and must be free from the influence of conflicts of interest.

7. What are the Duties Owed to Firms and Subordinates?

   A CFP professional must use reasonable care when supervising others (including subordinates and other CFP professionals), comply with lawful objectives and policies of their firm, and provide notice to the CFP Board of certain events. They must also not engage in conduct that misrepresents the firm or violates firm policy.

8. What are the key Duties Owed to the Public and the Profession?

   Refrain from conduct that reflects adversely on integrity or fitness, the profession, or the CFP marks; maintain the public's trust; comply with the law; and properly use the CFP certification marks (e.g., as an adjective, never as part of a firm name or domain name).

9. Define a 'Material Conflict of Interest' under the CFP Board Standards.

   A conflict that a reasonable client would consider likely to affect the CFP professional's recommendation or advice, or the professional's judgment in providing Financial Advice or Financial Planning.

10. What disclosure is required for a material conflict of interest, and may it be oral or written?

    The professional must disclose the conflict sufficiently specifically so the client can understand it and give informed consent. Disclosure may be made orally or in writing, but the burden is on the professional to prove it was adequately disclosed and that informed consent was obtained; ambiguity is interpreted in the client's favor.

11. List the Seven Steps of the Financial Planning Process in order.

    (1) Understanding the client's personal and financial circumstances; (2) Identifying and selecting goals; (3) Analyzing the client's current course of action and potential alternative course(s) of action; (4) Developing the financial planning recommendation(s); (5) Presenting the financial planning recommendation(s); (6) Implementing the recommendation(s); (7) Monitoring progress and updating.

12. In Step 1 of the financial planning process, what two categories of information must the CFP professional obtain?

    Qualitative (subjective) information — health, life expectancy, family circumstances, values, attitudes, expectations, risk tolerance, goals, needs, priorities — and quantitative (objective) information — income, expenses, assets, liabilities, cash flow, taxes, insurance, employee benefits, etc.

13. In Step 3, what must a CFP professional do when analyzing the current course of action?

    Assess the advantages and disadvantages of the client's current course of action, evaluate whether it maximizes the potential to meet the client's goals, and (if applicable) develop and evaluate one or more alternative courses of action.

14. What information must be communicated when presenting recommendations in Step 5?

    The recommendation(s) and the information that was required to be considered in developing them, including the assumptions, the basis for the recommendation, the conflicts of interest, and how the recommendation is designed to maximize the potential to meet the client's goals.

15. What must be addressed regarding implementation responsibilities in Step 6?

    The CFP professional must establish with the client whether the professional has implementation responsibilities, identify and analyze actions/products/services, recommend specific actions or products, and discuss/select the actions, products, and services. They must address conflicts of interest related to implementation.

16. What must be established about monitoring responsibilities in Step 7?

    The CFP professional and client must agree on who is responsible for monitoring progress toward goals, reviewing the situation, and updating the goals, recommendations, or implementation decisions, including the scope and frequency of monitoring.

17. What is the definition of 'Financial Advice' under the CFP Board Standards?

    A communication that, based on its content, context, and presentation, would reasonably be viewed as a recommendation that the client take or refrain from taking a particular course of action regarding investments, insurance, estate, retirement, tax, debt, or other financial matters; or the exercise of discretionary authority over client assets.

18. What is the definition of 'Financial Planning' under the CFP Board Standards?

    A collaborative process that helps maximize a client's potential for meeting life goals through Financial Advice that integrates relevant elements of the client's personal and financial circumstances.

19. What three factors determine whether a CFP professional's Financial Advice requires Financial Planning (the Integration Factors)?

    (1) The number of relevant elements of the client's personal and financial circumstances the advice may affect; (2) the portion and amount of the client's financial assets the advice may affect; and (3) the length of time the client's circumstances may be affected by the advice.

20. What are the three ways the Practice Standards for the Financial Planning Process can be triggered?

    (1) The CFP professional agrees to provide or does provide Financial Planning; (2) the CFP professional represents that they will provide Financial Planning; or (3) the Financial Advice provided requires Financial Planning based on the Integration Factors.

21. When Financial Planning is required but the client does not agree to it, what must the CFP professional do?

    The professional must either not enter into the engagement, limit the scope to services that do not require Financial Planning and clearly disclose that the services are not Financial Planning, provide the services and comply with the Practice Standards, or terminate the engagement.

22. What must be disclosed to a client when establishing the Scope of Engagement?

    The services and products to be provided; how the client pays and how the professional/firm and related parties are compensated; the use of other persons; how/when information will be provided; and the existence of any material conflicts of interest. Plus written disclosures required when Financial Planning is provided.

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