Lecture: CFP Code of Ethics and Standards of Conduct

Introduction

• Focus on new Code of Ethics and Standards of Conduct by CFP Board.
• Anxiety among students due to changes and upcoming exam.
• Effective from October 1st, enforced by June next year.
• November 2019 exam to include these standards.
• Resource materials by the CFP Board are excellent.

Key Topics

Fiduciary Duty

• Major focus of new standards.
• Distinction between financial advice and financial planning.
• Three duties: Loyalty, Care, Duty to follow instructions.

Conflicts of Interest

• Must disclose and manage conflicts of interest.
• Duty to act in client’s best interest even with conflicts.
• Material conflicts can be disclosed verbally.

Disclosures

• Important area on the exam.
• Must disclose conflicts of interest at the beginning of the relationship.
• Material changes must be reported within 90 days.

Professionalism and Compliance

• Comply with law, confidentiality, and privacy.
• Discussed when sharing information is appropriate.

Compensation Method

• Difference between fee-only and fee-based.
• Complexities in claiming fee-only due to sales-related compensation.

Financial Planning Process

• Steps in financial planning process defined.
• Analyze client’s current course of action.

Duties to Firm and Subordinates

• Report public discipline or legal issues to the firm.
• Bankruptcy must be reported; second bankruptcy can lead to revocation of marks.
• Federal tax liens also reportable.

Study Strategy

• Recommend reading the Code and Standards weekly.
• Focus on understanding fiduciary duty and disclosure requirements.

Additional Resources

• Roadmap and Case Studies are valuable resources.
• Roadmap provides visual breakdown of duties and disclosures.
• Case Studies help understand application of standards in real scenarios.

Examination Tips

• Expect questions that test understanding of standards and ethics.
• Common themes include fiduciary duty, conflicts of interest, and disclosure requirements.
• Important to know specific timelines (e.g., 30 days for reporting certain changes).

Conclusion

• Understanding and thorough review of CFP resources are crucial.
• Preparing involves more than just practical knowledge; it’s about understanding CFP Board's perspective.