ETHICS IN ACTION 1 WELCOME • Pre-approved by CFP Board for 2 ethics CE • Filed electronically • P-A-T • Present • Apply • Test 2
DISCLAIMERS • The opinions expressed are those of the presenter and do not necessarily represent those of CFP Board • Case studies are fictitious and any resemblance to real people or circumstances is purely coincidental. • Participation is required for continuing education credit to be granted. • Complete copies of the Standards of Professional Conduct are available for download at www.cfp.net 3 LEARNING OBJECTIVES 1. Understand financial 4. Understand the planning, the process & required elements of an subject areas agreement 2. Describe the material 5. Understand & apply elements of financial disclosure requirements planning 6. Define and recognize 3. Recognize financial planning fiduciary duty & material elements 4
LEARNING OBJECTIVE 1 Understand financial planning, the process & subject areas The Standards of Professional Conduct Code of Ethics and Principles Rules of Conduct Financial Planning Practice Standards Candidate Fitness Standards Disciplinary Rules and Procedures 5 SIX STEP PROCESS Goal setting Data Monitor Financial planning gathering begins when a certificant uses the six step process Implement Analyze Propose 6
Cash Retirement Protection Flow Tax Estate Investments Planning Planning SUBJECT AREAS 7 Financial Planning Defined • "Personal financial planning" or " financial planning" denotes the process of determining whether and how an individual can meet life goals though the proper management of financial resources. Financial planning integrates the financial planning process with the financial planning subject areas. 8
LEARNING OBJECTIVE 2 DESCRIBE THE MATERIAL ELEMENTS OF FINANCIAL PLANNING Retirement Planning • Financial planning takes Asset Estate Allocation Planning many forms. • Sometimes financial Personalized Cash Net planning evolves over time. Financial Flow Worth Plan • It is important to know when you are providing Protection Major financial planning. Planning Purchases Education Funding 9 MATERIAL ELEMENTS • What are the client's expectations? • What are the client's intentions? 10
MATERIAL ELEMENTS • Are multiple subject areas involved? • Is this less transactional and more analytical? 11 MATERIAL ELEMENTS • How comprehensive is the data-gathering? • Does it go beyond what is required to complete the task? 12
MATERIAL ELEMENTS • How broad are the recommendations? • Do they expand the advice into other subject areas too specifically? 13 LEARNING OBJECTIVE 3 Recognize financial planning & material elements Retirement Asset Planning Estate Allocation Planning • If you are performing any of the material elements, it is likely Personalized Cash Net that CFP Board will Financial Flow Worth consider it financial Plan planning. Protection Major Planning Purchases Education Funding 14
LEARNING OBJECTIVE 3 Recognize financial planning & material elements • Financial planning integrates multiple subject areas using the financial planning process 15 IS THIS FINANCIAL PLANNING? 16
IS THIS FINANCIAL PLANNING? 17 ACTIVITY ONE Put the steps in the right order A. Monitor B. Analyze C. Recommend D. Gather Data E. Implement F. Goal Setting 18
IS THIS FINANCIAL PLANNING? 19 IS THIS FINANCIAL PLANNING? 20
ROUND 1 QUIZ BOWL 21 LEARNING OBJECTIVE 4 Understand the required elements of an agreement • Rule 1.3 describes requirements • Must be written • May consist of more than one document 22
LEARNING OBJECTIVE 4 Understand the required elements of an agreement • Parties • Date and duration • How each party can terminate • Services to be provided 23 LEARNING OBJECTIVE 4 Understand the required elements of an agreement Rule 1.2 adds 2 additional requirements • If proprietary products are allowed • Identification of any 3rd parties performing duties 24
IS THIS A VALID AGREEMENT? 25 IS THIS A VALID AGREEMENT? 26
IS THIS A VALID AGREEMENT? 27 LEARNING OBJECTIVE 5 Understand & apply disclosure requirements CFP Board requires: • Written disclosures of compensation and conflicts of interest. • Including 3rd parties • Employer • Family 28
ACTIVITY TWO As a fiduciary which do you need to disclose?: Factors Trails Subsidiaries Cost to affecting produce payout plan Performance 12(b)1 bonuses fees Referral Relationship arrangements with parent company Actual $$$ from Other implementation Date of business Limitations birth activities 29 LEARNING OBJECTIVE 5 Understand & apply disclosure requirements Rule 2.2 b • Every client must be made aware of likely conflicts of interest • Financial planning clients receive written disclosure, too. 30
LEARNING OBJECTIVE 5 Understand & apply disclosure requirements Personal Interests of Company Values Friends Policy Client Personal Values Gain Client Company Costs Profits Conflict 31 LEARNING OBJECTIVE 6 Define and recognize fiduciary duty Rule 1.4 A certificant shall at all times place the interest of the client ahead of his or her own. When the certificant provides financial planning or material elements of financial planning, the certificant owes to the client the duty of care of a fiduciary as defined by CFP Board. 32
LEARNING OBJECTIVE 6 Define and recognize fiduciary duty Department of Trust Law Labor Common Investment Law Advisor’s Act CFP Board 33 LEARNING OBJECTIVE 6 Define and recognize fiduciary duty CFP Board definition: • One who acts in utmost good faith, in a manner he or she reasonably believes to be in the best interest of the client. 34
LEARNING OBJECTIVE 6 Define and recognize fiduciary duty Permitted by Regulator • Best depends on: • Applicable regulation Offered by Business • Business Model Model • Client circumstances Best • Timeframe • Risk tolerance • Income & Assets • Objective 35 DOES THIS MEET A FIDUCIARY STANDARD? 36
DOES THIS MEET A FIDUCIARY STANDARD? 37 ROUND 2 CATEGORIES 38
LEARNING OBJECTIVE 7 Understand Suitability for Seniors Rule 1.4 A certificant shall at all times place the interest of the client ahead of his or her own. When the certificant provides financial planning or material elements of financial planning, the certificant owes to the client the duty of care of a fiduciary as defined by CFP Board. 39 CONCLUSION • Understanding the Standards of Professional Conduct is our obligation • Good ethics is good business • Beware of surface level interpretation • Send questions to standards@cfp.net 40
CONTACT INFO dan@candura.net www.candura.net @CanduraGroup @Pennytree 41
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