Ethics and Professional Standards Flashcards
6 cards from real CFC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Ethics and Professional Standards flashcards as text
Under CFP Board's fiduciary standard, a financial planner must always act in:
Answer: The client's best interest
The CFP Board's Code of Ethics requires CFP professionals to act as fiduciaries — placing the client's interest first at all times when providing financial advice.
A CFC who discovers a material fact about a client's financial situation that the client did not disclose must:
Answer: Address it with the client and consider how it affects the advice
Discovering undisclosed material information requires the planner to address it with the client and reassess how it may affect the planning recommendations or the engagement.
Which action by a financial consultant would constitute a conflict of interest that must be disclosed?
Answer: Recommending a product for which the planner receives a higher commission than alternatives
Receiving compensation that differs based on product recommendations creates a conflict of interest that must be fully disclosed to the client under fiduciary and suitability obligations.
Competence as an ethical obligation requires a financial professional to:
Answer: Provide advice only within their areas of knowledge and skill, referring out when appropriate
Professional competence requires limiting advice to areas where the practitioner has adequate knowledge and skill, while referring clients to qualified specialists for matters outside that competence.
Confidentiality obligations in financial planning mean the practitioner must:
Answer: Protect client information and only disclose it with client consent or as required by law
Professionals must safeguard client information, obtaining consent before disclosure to third parties and complying with applicable privacy laws like Gramm-Leach-Bliley.
A CFC who charges a fee while also receiving commissions on products sold to the same client is operating under which compensation model?
Answer: Fee-based (fee-and-commission)
A fee-based model combines advisory fees with sales commissions, distinguishing it from the fee-only model where no commissions are received.