CFP Professional Standards & Competencies 4 — Questions and Answers
Question 1: A CFP® professional is asked to provide a second opinion on a financial plan prepared by a competitor. What is the MOST appropriate approach?
- Decline, as reviewing another planner's work creates a conflict of interest
- Agree to provide the opinion and, if material deficiencies are found, ensure the client understands them clearly (Correct answer)
- Provide the opinion but refrain from commenting on the other planner's recommendations to maintain professionalism
- Only provide the second opinion if the client agrees to switch planners
Correct answer: Agree to provide the opinion and, if material deficiencies are found, ensure the client understands them clearly
Providing a second opinion is a legitimate service; the CFP® professional must be objective and clearly communicate any material deficiencies found in the existing plan.
Question 2: CFP Board's experience requirement for initial certification can be met through:
- Only direct client-contact experience in a financial planning role
- Either 6,000 hours of professional experience through the Standard Pathway or 4,000 hours through the Apprenticeship Pathway (Correct answer)
- A minimum of 3 years of employment at a FINRA-registered broker-dealer
- Completion of an approved CFP Board Registered Program plus a two-year supervised internship
Correct answer: Either 6,000 hours of professional experience through the Standard Pathway or 4,000 hours through the Apprenticeship Pathway
CFP Board offers two pathways: the Standard Pathway (6,000 hours of professional experience) or the Apprenticeship Pathway (4,000 hours under direct supervision of a CFP® professional).
Question 3: A CFP® professional who also holds a securities license receives both a planning fee and a commission on an implemented product recommendation. This is:
- Prohibited under CFP Board's Standards in all circumstances
- Permissible if the compensation arrangement is fully disclosed to the client and the advice remains in the client's best interest (Correct answer)
- Permissible only if the client waives the conflict of interest in writing
- Prohibited unless the CFP® professional operates as a registered investment adviser
Correct answer: Permissible if the compensation arrangement is fully disclosed to the client and the advice remains in the client's best interest
Dual compensation (fees and commissions) is permissible under CFP Board's Standards provided all compensation is fully disclosed and the advice remains in the client's best interest.
Question 4: Which of the following activities counts as a 'material element of financial planning' triggering CFP Board's Standards?
- Providing a general educational seminar on retirement savings with no individual client interaction
- Helping a specific client develop a tax strategy that integrates with their retirement and estate goals (Correct answer)
- Selling an annuity product to a client without providing a comprehensive financial plan
- Answering general questions about Social Security claiming rules at a community workshop
Correct answer: Helping a specific client develop a tax strategy that integrates with their retirement and estate goals
Providing integrated, individualized advice that addresses multiple planning areas for a specific client constitutes a material element of financial planning and triggers CFP Board's Standards.
Question 5: CFP Board's Fitness Standards include which of the following as a basis for permanent bar from CFP® certification?
- A single DUI conviction more than 10 years ago
- Felony conviction for theft, embezzlement, or other financial crimes (Correct answer)
- Bankruptcy filing within the past 5 years
- Failure to pay CFP Board certification fees for two consecutive years
Correct answer: Felony conviction for theft, embezzlement, or other financial crimes
Felony convictions for theft, embezzlement, fraud, or other financial crimes are listed among the grounds for permanent bar from CFP® certification under CFP Board's Fitness Standards.
Question 6: The 'diligence' principle in CFP Board's Code of Ethics requires a CFP® professional to:
- Respond to all client inquiries within 24 hours
- Provide professional services in a prompt, thorough, and careful manner (Correct answer)
- Complete a minimum of 40 hours of continuing education per reporting period
- Maintain a written business continuity plan for client service interruptions
Correct answer: Provide professional services in a prompt, thorough, and careful manner
Diligence requires that CFP® professionals provide their services in a timely, thorough, and careful manner, ensuring client matters receive appropriate attention and follow-through.
Question 7: A CFP® professional's client dies. The professional's obligation regarding the deceased client's records is to:
- Immediately transfer all records to the estate executor
- Retain client records for the period required by applicable law and regulatory requirements (Correct answer)
- Destroy all records within 90 days to protect the family's privacy
- Transfer records to the surviving spouse regardless of estate documentation
Correct answer: Retain client records for the period required by applicable law and regulatory requirements
CFP® professionals must retain client records for the time period specified by applicable federal and state laws and any regulatory requirements, even after a client's death.
CFP Professional Standards & Competencies 4
A CFP® professional is asked to provide a second opinion on a financial plan prepared by a competitor.
What is the MOST appropriate approach?