CFP Professional Standards & Competencies 5 — Questions and Answers
Question 1: A prospective client asks a CFP® professional whether their planning recommendations are independent. The planner receives revenue-sharing payments from one fund family. The planner should:
- Confirm independence since revenue-sharing is not the same as a commission
- Disclose the revenue-sharing arrangement and explain how it may influence recommendations (Correct answer)
- Decline to answer the question as it is proprietary business information
- Confirm independence because the fund choices are still ultimately the client's decision
Correct answer: Disclose the revenue-sharing arrangement and explain how it may influence recommendations
Revenue-sharing arrangements are a form of compensation that can create a conflict of interest and must be disclosed so the client can make an informed assessment of the planner's independence.
Question 2: CFP Board's continuing education requirement for active certificants is:
- 30 hours every two years, including 2 hours of CFP Board-approved ethics education (Correct answer)
- 30 hours every two years, including no specific ethics requirement
- 40 hours every two years, including 5 hours of CFP Board-approved ethics education
- 20 hours annually, with no ethics-specific requirement
Correct answer: 30 hours every two years, including 2 hours of CFP Board-approved ethics education
CFP® certificants must complete 30 hours of CE every two-year reporting period, which must include at least 2 hours of CFP Board-approved ethics education.
Question 3: When a CFP® professional terminates a client relationship, which action is MOST consistent with CFP Board's Standards?
- Immediately cease all communication and return all documents to the client
- Provide the client with reasonable notice, complete any urgent work in progress, and facilitate an orderly transition (Correct answer)
- Continue services until the client finds a replacement planner regardless of timeline
- Notify CFP Board of the termination within 10 business days
Correct answer: Provide the client with reasonable notice, complete any urgent work in progress, and facilitate an orderly transition
Upon terminating a relationship, the CFP® professional must provide reasonable notice, complete any urgent in-progress work, and support an orderly transition to protect the client's interests.
Question 4: A CFP® professional using the title 'Wealth Manager' in marketing materials is:
- Prohibited from using any title other than 'CFP®' in professional communications
- Permitted to use the title provided it is not misleading and the CFP® marks are also displayed accurately (Correct answer)
- Required to obtain CFP Board's pre-approval before using any supplemental title
- Violating CFP Board's Standards because only the CFP® designation may be marketed
Correct answer: Permitted to use the title provided it is not misleading and the CFP® marks are also displayed accurately
CFP® certificants may use additional professional titles provided the titles are not misleading and do not imply credentials or qualifications the professional does not hold.
Question 5: The financial planning practice standard requiring the CFP® professional to 'select and present the financial planning recommendation(s)' includes which element?
- Always presenting a single best recommendation to avoid overwhelming the client
- Presenting recommendation(s) in a manner the client can understand, with sufficient information to make an informed decision (Correct answer)
- Obtaining signed client approval before presenting any formal recommendation
- Limiting recommendations to strategies that guarantee positive client outcomes
Correct answer: Presenting recommendation(s) in a manner the client can understand, with sufficient information to make an informed decision
The presentation standard requires that recommendations be communicated clearly and completely, enabling the client to understand the basis for the advice and make an informed decision.
Question 6: A CFP® professional is asked to testify as an expert witness in a financial dispute. They may:
- Testify only on behalf of clients, never for opposing parties
- Serve as an expert witness provided they are competent in the relevant area and remain objective (Correct answer)
- Use the CFP® marks in testimony only with CFP Board's written permission
- Decline all expert witness work as it creates an inherent conflict with CFP Board's Standards
Correct answer: Serve as an expert witness provided they are competent in the relevant area and remain objective
Acting as an expert witness is a legitimate professional activity; the CFP® professional must be competent in the relevant subject matter and maintain objectivity regardless of which party retained them.
Question 7: Which of the following MOST accurately describes the relationship between CFP Board's Standards and applicable federal and state laws?
- CFP Board's Standards supersede all state and federal laws for CFP® certificants
- CFP Board's Standards may impose higher obligations than law; when they conflict, the stricter standard generally applies (Correct answer)
- Compliance with applicable law is sufficient to satisfy all CFP Board ethical obligations
- CFP Board's Standards apply only when no applicable law or regulation addresses the situation
Correct answer: CFP Board's Standards may impose higher obligations than law; when they conflict, the stricter standard generally applies
CFP Board's Standards often impose obligations beyond what law requires; certificants must comply with both, and where they conflict, the higher standard (typically CFP Board's) governs.
CFP Professional Standards & Competencies 5
A prospective client asks a CFP® professional whether their planning recommendations are independent.
The planner receives revenue-sharing payments from one fund family.
The planner should: