Professional Standards & Competencies Flashcards
7 cards from real CFP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Professional Standards & Competencies flashcards as text
A CFP® professional discovers their client has been the victim of financial elder abuse by a family member. What is the MOST appropriate first step?
Answer: Discuss the situation with the client to understand their wishes and assess safety, then consider mandatory reporting obligations
The CFP® professional should first discuss the matter with the client to understand their perspective and assess safety before taking action, while also considering any mandatory reporting requirements under applicable law.
Under the CFP Board's Practice Standards, which of the following BEST describes the 'understanding the client's personal and financial circumstances' step?
Answer: Gathering quantitative data such as income, expenses, assets, liabilities, and qualitative data such as goals, values, and risk tolerance
This step requires collecting both quantitative financial data and qualitative information about the client's goals, values, health, family situation, and risk tolerance to form a complete picture.
A CFP® professional who is also a registered investment adviser charges an hourly fee for financial planning. A referral arrangement with a mutual fund company requires disclosure of:
Answer: The referral arrangement and any compensation received therefrom, in writing, prior to or at the time of engagement
CFP Board's Code requires disclosure of all sources of compensation, including referral arrangements, in writing before or at the point of engagement, regardless of the amount.
Which scenario BEST illustrates a violation of CFP Board's competence standard?
Answer: A CFP® professional provides estate planning advice on a complex multi-generational trust without adequate knowledge or referral to a specialist
Providing advice on complex matters outside one's competence without referring to a qualified specialist violates the CFP Board's competence standard under the Code of Ethics.
The CFP Board's fiduciary standard applies:
Answer: At all times when providing financial planning or material elements of financial planning
CFP Board's fiduciary duty applies at all times when the CFP® professional is providing financial planning or material elements of it, regardless of their employer or compensation model.
A client instructs their CFP® professional to invest all retirement assets in a single sector ETF, contrary to the planner's recommendation. The planner should:
Answer: Document the advice given, explain the risks, and respect the client's informed decision while noting disagreement in writing
CFP® professionals must respect client autonomy and their right to make informed decisions; the professional's obligation is to advise clearly, document the recommendation, and note any disagreement.
Under CFP Board's Standards of Conduct, a 'material conflict of interest' requires the CFP® professional to:
Answer: Disclose the conflict and obtain the client's informed consent before proceeding
Material conflicts of interest must be fully disclosed to the client, and the CFP® professional must obtain the client's informed consent before proceeding with the advice or recommendation.