CFP Notes: Professional Conduct and Regulation - Rules of Conduct

Defining the Relationship with the Prospective Client or Client
It is important to set the client’s expectations as to what she or he may expect from the client/certified financial planner (CFP) relationship that he or she is entering. The initial meetings with the client should be spent clarifying each party’s roles and responsibilities. The CFP professional should explain any services he or she will provide, how he or she bills those services, and how the client will pay the bill. It is also crucial to set expectations with the client about how long the engagement will last. Lastly, as part of the relationship definition, the client should be made aware of the reasoning of decisions and why the CFP professional made those decisions.

Certified Financial Planners Board Disclosures Requirements
The Certified Financial Planners (CFP) Board requires that certain disclosures be made in writing, while others may optionally be made verbally. Before entering into a business relationship with a client, the CFP professional must disclose verbally or in writing the obligations of the planner and the client, pertinent information about how the CFP professional or affiliates will be compensated, if proprietary products will be offered, and any situation by which the CFP professional may use other parties to fulfill the agreement. The disclosures that must be in writing are as follows: the parties to the agreement, the date and length of the client-planner engagement, how either party may terminate the agreement, services provided, how the planner will be paid, any conflicts of interest, contact information for the planner, and information about the planner that may influence the client’s decision as to whether or not to enter a planning relationship.

Prospective Client and Client Information and Property
The Certified Financial Planners (CFP) Board establishes that CFP professionals have an expectation of fiduciary conduct regarding clients’ information and property. There is an expectation of confidentiality in each relationship. If the confidentiality is breached, it could result in censure of the planner or termination of his right to use the CFP mark. This applies to physical as well as electronic information. The CFP professional should ensure that the client has access to all information necessary to make informed decisions about the recommendations. The CFP professional may generally not borrow money from the client, although there are exceptions, such as when the client is a business in the business of loaning money. If the CFP professional takes possession of the client’s property, excellent records should be kept accounting for the property, and it should not be commingled with the CFP professional’s property. Planner-retained property should be returned to the client immediately on client request.

Obligations to Prospective Clients and Clients
The Certified Financial Planner (CFP) Board dictates that certificants treat client and prospects fairly and with integrity and objectivity. Certificants are also under onus to only offer advice in areas in which they maintain competence. They must maintain compliance with applicable regulatory authorities (FINRA, the Securities and Exchange Commission, etc.) and exercise reasonable and prudent judgment when providing recommendations. This judgment should also extend to third parties contracted by the certificant. Only suitable recommendations should be made to the client, and certificants should make any client or perspective client aware of their suspension or revocation by the CFP board.

Obligations to Employers as Established by the CFP Board
The Certified Financial Planner (CFP) Board establishes that CFP professionals’ obligations are not only to their clients, but also to their employer, should they have one. CFP professionals are to diligently pursue their employer’s goals and objectives, as long as those goals and objectives are legal. If the company’s methods are not legal, perhaps they should rethink employment. The CFP Board acknowledges that it only has authority over certificants and none over each individual CPF professional’s employer, but offers its support to employers if they should decide to enact CFP Board-approved codes of conduct.

Obligations to the CFP Board
The Certified Financial Planners (CFP) Board requires that certificants abide by all terms and agreements made with the CFP Board. This includes when they may and may not use the CFP marks. They also proscribe meeting all continuing education requirements to be able to use those marks. CFP professionals are obligated to inform the CFP Board of updates to their personal information (i.e., email address, physical address, phone number, etc.) within 45 days of the change. The CFP professional must also inform the board of any conviction of crime (excluding minor traffic offenses) or professional discipline within 30 days of its occurrence. This applies also to changes in the status of a matter that was previously disclosed to the CFP Board. Finally, CFP professionals are not to engage in activities that will affect their reputation or the reputation of the CFP marks negatively.