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This question is a part of BIF's Special Webinar series which was created to help students affected by the July 2020 CFP® Exam postponement to September 2020.
Joni, a CFP® Professional, has met with Brandi at a local café three times to discuss the importance of retirement planning. Brandi understands that the meetings are informational in nature, but she has recently acted upon Joni’s specific recommendations to rebalance her retirement portfolio and purchase a deferred variable annuity. Brandi’s retirement assets comprise approximately 10% of her net worth and Joni’s suggestions have not created additional risks or barriers.
Based on the nature of the engagement between Joni and Brandi, select the duties of a CFP® Professional that Joni must uphold.
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- Fiduciary Duty
- Disclose and Manage Conflicts of Interest
- Practice Standards for the Financial Planning Process
- Confidentiality and Privacy
- I only
- I and III
- I, II, and IV
- II, III, and IV
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Correct answer: C. I, II and IV
Instructor insight:
Joni’s specific recommendations to rebalance her retirement portfolio and purchase a deferred variable annuity suggest that Financial Advice has occurred. As a rule of thumb, the more customized the information provided by a CFP® Professional, the more likely there is Financial Advice.
Because Joni is offering Brandi Financial Advice the following Duties apply:
- The Duties That Apply at All Times (includes Confidentiality and Privacy)
- Fiduciary Duty
- Disclose and Manage Conflicts of Interest
- Provide Information to a Client
- Duties When Recommending, Engaging, and Working with Additional Persons
Brandi understands that Financial Planning has not and will not occur, as noted by her awareness of the informational nature of the meetings. Her retirement assets comprise approximately 10% of her net worth and Joni’s suggestions have not created additional risks or barriers. As a result, Financial Planning is not occurring, and the Practice Standards for the Financial Planning Process do not apply.
CFP® Exam insight:
To fully understand the applicable duties of a CFP® Professional, begin by mastering the definitions of Financial Advice and Financial Planning outlined in the Code of Ethics and Standards of Conduct. From there, consult the ‘Duties of a CFP® Professional’ chart on page 3 of the Roadmap to the Code & Standards. Commit the duties that apply when providing Financial Advice, then, those that apply while providing Financial Planning. ALL other duties owed to clients, Firm and subordinates, and CFP Board apply at ALL times.
