Financial Planning Practice and Ethics
What the domain tests
Practice and ethics tests the RFP code, fiduciary conduct, disclosure, suitability, confidentiality, and regulatory boundaries.
Core rules
- Client first: place the client's interest above the planner's compensation.
- Integrity, objectivity, competence, confidentiality, professionalism, and diligence.
- Disclose conflicts, referral fees, commissions, and limitations in writing before advice.
- Know the client: goals, risk tolerance, financial situation, and constraints.
- Do not guarantee returns, misrepresent credentials, borrow from clients, or use client data without consent.
- Confidentiality continues after the engagement ends; keep files secure under the Data Privacy Act.
Worked example
An adviser recommends a fund that pays a 1% referral fee. The client is also eligible for a lower-cost index fund. The adviser discloses the fee, compares both options, and documents the client's choice. Reasoning: disclosure alone is not enough; the recommendation must be suitable and the client must understand the conflict.
Traps
Selling unlicensed products; using the RFP mark to imply SEC or Insurance Commission approval; promising guaranteed returns; sharing client information; signing for a client.