PROFESSIONAL CONDUCT & PLANNING — CFP EXAM CHEAT SHEET

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CODE OF ETHICS: Four Core Principles

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THE THREE DUTIES (Apply Whenever Financial Advice Is Given)

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2019 GAME CHANGER: Fiduciary duty applies at all times when providing financial advice — not just formal planning engagements. One-time product recommendations trigger fiduciary duty.

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PROHIBITED CONDUCT

❌ False/misleading claims about credentials, experience, services, fees ❌ Dishonesty, fraud, deceit, misappropriation ❌ Withholding material information ❌ Conduct adversely reflecting on the profession

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7-STEP FINANCIAL PLANNING PROCESS (2021 Standard)

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Note: Step 3 added in 2021; don't use 6-step model.

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ENGAGEMENT LETTER (Required Before/At Start)

Must include:

• Scope of services

• Compensation structure

• Responsibilities of both parties

• Duration and termination terms

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FIDUCIARY DUTY TRIGGER TABLE

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DATA GATHERING: TWO TYPES REQUIRED

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Both essential for complete plan.

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LIFE STAGE PRIORITIES (Quick Reference)

• 20s–30s: Emergency fund, debt, term life, start retirement savings

• 40s: Accelerate retirement savings, college funding, disability insurance, basic estate plan

• 50s–60s: Retirement projections, catch-up contributions, long-term care, Social Security timing

• Retirement: Income distribution, RMDs, Medicare, healthcare, legacy planning

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DISCIPLINARY PROCESS & SANCTIONS

Flow: Complaint → Investigation → Probable Cause → Hearing → Sanction

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Principle	Definition
Integrity	Be honest; disclose and manage conflicts
Competence	Maintain skills; only accept competent work
Diligence	Fulfill commitments thoroughly and timely
Client's Best Interest	Place client above self and firm
Duty	Core Obligation
Loyalty	Place client interests above own; avoid/disclose conflicts; no personal use of client info
Care	Act with prudent professional skill; inquire into client situation; tailor advice to circumstances
Follow Instructions	Comply with client's reasonable directions (even if you disagree, if ethical/legal)
#	Step
1	Understand client's personal & financial circumstances
2	Identify & select goals, needs, priorities
3	Analyze current course of action (if no changes made)
4	Develop recommendations to address gaps
5	Present recommendations with rationale & trade-offs
6	Implement agreed strategies
7	Monitor & update as circumstances change
Situation	Fiduciary?	Why
Comprehensive planning engagement	✅ Yes	Always
One-time investment recommendation	✅ Yes	2019 revision: advice = fiduciary
Product sale with attached advice	✅ Yes	Advice triggers duty
Pure product sale (no advice)	❌ No	No advice component
Quantitative	Qualitative
Income, assets, liabilities, insurance, taxes	Risk tolerance, values, family dynamics, attitudes, vision
Sanction (Least to Most Severe)
Private Censure
Public Letter of Admonition
Suspension (defined period)
Revocation (permanent)

Auto-revocation (no hearing): Felony convictions for financial crimes; certain regulatory bars.

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GROUNDS FOR LOSING CFP DESIGNATION

• Felony convictions (especially financial crimes)

• Bankruptcy

• SEC/FINRA bars or state license revocation

• Violations of Standards (fiduciary breach, misrepresentation)

• Failure to respond to CFP Board inquiries

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SCOPE OF ENGAGEMENT

• Defined in written/oral agreement

• Narrow scope allowed but limitations must be disclosed

• Mid-engagement scope changes require revised agreement

• Cannot use narrow scope to escape fiduciary duty for advice given

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EXAM HOT BUTTONS

🎯 2019 Revision: Fiduciary duty = always on (not just planning engagements) 🎯 3 Duties: Loyalty, Care, Follow Instructions (all three required) 🎯 7-Step Process: Know order; Step 3 is distinct 🎯 Engagement Letter: Required before/at start; define scope & compensation 🎯 Conflict of Interest: Must disclose AND manage (not just disclose) 🎯 Life Stage: Match recommendations to client circumstances