CFP: Professional Conduct and Regulation

The two components

CFP Board's Standards of Conduct combine a principles-based Code of Ethics - Integrity, Objectivity, Competence, Fairness, Confidentiality, Professionalism, Diligence - with rules-based Standards of Conduct. Fiduciary duty attaches when providing financial advice, not to every client interaction (a pure product sale may not trigger it).

The seven-step practice standard

1. Understand the client's personal and financial circumstances
2. Identify and select goals
3. Analyze the current course of action and alternatives
4. Develop the recommendation(s)
5. Present the recommendation(s)
6. Implement
7. Monitor progress and update

Traps

• A single product sale is not financial planning; the practice standards apply to integrated planning.
• Fiduciary duty = duty of care + duty of loyalty. Disclosure alone does not excuse a conflict the adviser cannot manage.
• Confidentiality yields only with client consent, legal compulsion, or in defense of a disciplinary matter.
• Sanctions run from private censure to public letter of admonition, suspension, and revocation, often with conditions.
• Reportable events (bankruptcy, certain criminal, civil, or regulatory actions) must be reported within 30 days.
• Expect questions on CFP mark usage and advertising - ask whether a title or claim is misleading.

Rule of thumb

Written disclosure belongs in the engagement document: scope of engagement, compensation method, conflicts, and the client's responsibilities.

Worked example. An adviser receives a commission on a product sold to a planning client while the engagement letter says "fee-only." The correct action is to correct the compensation description in writing before or at engagement - not to mention the commission verbally at the sale.