CFP Professional Standards & Competencies 3 — Questions and Answers
Question 1: CFP Board's Code of Ethics requires CFP® professionals to act with 'integrity.' Which action MOST clearly violates this principle?
- Recommending a product that earns a commission when it is also in the client's best interest and fully disclosed
- Omitting a material risk in a client presentation because the planner believes the client would find it confusing (Correct answer)
- Declining to take on a client whose financial situation is beyond the planner's expertise
- Charging a higher fee to a high-net-worth client than to a lower-income client
Correct answer: Omitting a material risk in a client presentation because the planner believes the client would find it confusing
Omitting material information — even with good intentions — violates the integrity principle because it prevents the client from making a fully informed decision.
Question 2: When must a CFP® professional provide a written engagement letter or financial planning agreement?
- Only when compensation exceeds $5,000 per year
- Before or at the time of entering into a financial planning engagement (Correct answer)
- Within 30 days after the financial plan has been delivered
- Only for ongoing retainer relationships, not one-time consultations
Correct answer: Before or at the time of entering into a financial planning engagement
CFP Board's Practice Standards require that the scope of the engagement, compensation, and other material terms be documented in writing before or at the time the engagement begins.
Question 3: A CFP® professional is convicted of a felony unrelated to financial services. What is their obligation to CFP Board?
- No obligation exists because the conviction is unrelated to their professional practice
- They must self-report the conviction to CFP Board within 30 calendar days (Correct answer)
- They must surrender their CFP® marks immediately upon conviction
- They must notify all current clients within 10 business days
Correct answer: They must self-report the conviction to CFP Board within 30 calendar days
CFP Board's Procedural Rules require self-reporting of criminal convictions, including felonies unrelated to financial services, within 30 calendar days.
Question 4: Which of the following BEST describes the 'objectivity' principle in the CFP Board Code of Ethics?
- Always recommending the lowest-cost financial products available
- Maintaining an intellectual honesty and impartiality that is free from bias, prejudice, and conflicts of interest (Correct answer)
- Refusing to accept any form of commission-based compensation
- Disclosing all compensation to regulatory bodies annually
Correct answer: Maintaining an intellectual honesty and impartiality that is free from bias, prejudice, and conflicts of interest
Objectivity means providing advice and analysis free from bias and conflicts of interest, grounded in intellectual honesty regardless of the compensation model used.
Question 5: A CFP® professional learns that a colleague is using client funds for personal expenses. The CFP® professional's BEST course of action is to:
- Confront the colleague and give them 30 days to rectify the situation before reporting
- Report the misconduct to CFP Board and appropriate regulatory authorities (Correct answer)
- Remain silent to avoid damaging a professional relationship
- Advise affected clients directly without reporting to any authority
Correct answer: Report the misconduct to CFP Board and appropriate regulatory authorities
Misappropriation of client funds is a serious violation; CFP® professionals have an ethical obligation to report known misconduct to CFP Board and relevant regulatory authorities.
Question 6: The CFP® certification marks may be used by:
- Anyone who has passed the CFP® exam, regardless of whether they have met the experience and ethics requirements
- Only current CFP® certificants who are in good standing with CFP Board (Correct answer)
- Any financial planner employed by a CFP Board Registered Program
- Anyone who has completed an approved CFP education program
Correct answer: Only current CFP® certificants who are in good standing with CFP Board
Only individuals who have met all CFP Board requirements — education, examination, experience, and ethics — and who are currently certified and in good standing may use the CFP® marks.
Question 7: Under CFP Board's Standards, when analyzing a client's financial situation, which approach BEST reflects the financial planning process?
- Focus primarily on investment portfolio optimization as this drives most financial outcomes
- Evaluate the client's entire financial picture holistically, considering interrelationships among all planning areas (Correct answer)
- Address each financial planning area independently and sequentially to avoid confusion
- Prioritize tax planning above other areas since it affects all financial decisions
Correct answer: Evaluate the client's entire financial picture holistically, considering interrelationships among all planning areas
Holistic analysis — recognizing that decisions in one planning area affect others — is a core competency of the financial planning process and distinguishes it from product-specific advice.
CFP Professional Standards & Competencies 3
CFP Board's Code of Ethics requires CFP® professionals to act with 'integrity.' Which action MOST clearly violates this principle?