For CFP® Professionals

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Financial Planning

Look here for questions about whether an engagement is financial planning and the specific requirements of financial planning engagements.

CFP Board wants all CFP® professionals to have a thorough understanding of the Standards of Professional Conduct. Questions not answered in these FAQs may be sent to standards@cfpboard.org for consideration and possible inclusion in future revisions of this document.

Question 1-1: How does CFP Board define financial planning?

The Standards of Professional Conduct (Standards) define financial planning as “the process of determining whether and how an individual can meet life goals through the proper management of financial resources. Financial planning integrates the financial planning process with the financial planning subject areas.”

There are six steps to the financial planning process:

  1. Establishing and defining the client-planner relationship
  2. Gathering client data including goals
  3. Analyzing and evaluating the client’s current financial status
  4. Developing and presenting recommendations and/or alternatives
  5. Implementing the recommendations
  6. Monitoring the recommendations
“Financial planning subject areas” denotes the basic subject fields covered in the financial planning process which typically include, but are not limited to:
  • Financial statement preparation and analysis (including cash flow analysis/planning and budgeting)
  • Insurance planning and risk management
  • Employee benefits planning
  • Investment planning
  • Income tax planning
  • Retirement planning
  • Estate planning

Question 1-2: Will CFP Board consider an engagement to be financial planning solely because the CFP® professional used the six-step process?

No. CFP Board recognizes that the six steps are not unique to the financial planning process and may occur in connection with other activities such as brokerage, investment advisory and/or insurance products or services. Examples include gathering client information as part of a suitability analysis, making recommendations of various brokerage, investment advisory or insurance products or services,and implementing such recommendations.

Question 1-3: Does CFP Board require CFP® professionals to address a certain number of subject areas for the engagement to be considered financial planning?

No, CFP Board does not identify a minimum number of subject areas for an engagement to be considered financial planning. While it is more likely for financial planning to exist when multiple subject areas are involved, in some circumstances a financial planning engagement may exist even when a single subject area is involved. For example, a financial planning engagement may exist when a client requests a comprehensive retirement plan or requires a complex estate plan. In determining whether a financial planning engagement exists, CFP Board considers the circumstances involved and, in particular, the following factors:
  • The client’s understanding and intent in engaging the CFP® professional
  • The degree to which multiple financial planning subject areas are involved
  • The comprehensiveness of data gathering
  • The breadth and depth of recommendation

Question 1-4: Does CFP Board require CFP® professionals to address particular subject areas in order for the engagement to be considered financial planning?

No, CFP Board does not require CFP® professionals to address particular subject areas with each client. It is important to note that while some may consider financial planning as consisting essentially of investment planning, retirement planning or estate planning, these “financial planning subject areas” may or may not be part of the financial planning process as it is applied to a specific client’s situation. When attempting to determine if an engagement is financial planning, one should focus on the degree of integration between the financial planning process and the subject areas. Greater degrees of integration are more likely to be considered financial planning than lesser degrees of integration. In determining whether a financial planning engagement exists, CFP Board considers the circumstances involved and, in particular, the following factors:
  • The client’s understanding and intent in engaging the CFP® professional
  • The degree to which multiple financial planning subject areas are involved
  • The comprehensiveness of data gathering
  • The breadth and depth of recommendations

Question 1-5: Does CFP Board require CFP® professionals to complete all six steps for an engagement to be considered financial planning?

No, it is not necessary for each of the six steps to be followed in order for a financial planning engagement to exist. For example, some clients may ask a CFP® professional to provide financial planning recommendations and then work with another financial services provider to implement those recommendations. Other clients may ask a CFP® professional to assist them with the implementation of specific investments or strategies, or to review only one aspect of the client’s financial situation, such as estate issues or insurance needs. While these examples do not include all six steps, they may nevertheless constitute financial planning engagements.

When determining whether a financial planning engagement exists, the entirety of a client relationship should be examined. If the services to be provided are limited in scope, that client relationship may not be a financial planning engagement. When the services provided to an individual client become financial planning or material elements of financial planning, however, the client relationship becomes a financial planning engagement. Once a CFP® professional enters into a financial planning engagement with a client, CFP Board will take into consideration the history of the relationship between the CFP® professional and the client when determining whether future services provided to that client are also financial planning.

Question 1-6: Will CFP Board consider future engagements to be financial planning because the CFP® professional provided financial planning to the same client(s)?

Yes, when the services provided to an individual client involve financial planning or material elements of financial planning, the client relationship becomes a financial planning engagement. All future services to that client are likely to be considered by CFP Board to be part of that financial planning engagement until such time as the financial planning engagement is terminated.The CFP® professional should note that in circumstances where a financial planning engagement with a particular client is terminated under the terms of a contract with the CFP® professional’s firm, followed by an ongoing professional relationship between the client and the CFP® professional, the financial planning engagement with the CFP® professional may continue. If the financial planning engagement continues, so does the CFP® professional’s fiduciary obligation to the client. [See Questions 1-8, 1-9, 1-10 and  9-1]

Question 1-7: Will CFP Board consider an engagement to be financial planning solely based on the compensation model used by the CFP® professional?

No, CFP Board does not use compensation model as a determining factor when identifying whether a financial planning relationship exists. CFP Board does not advocate any particular business model or compensation arrangement. The Standards are compensation-neutral, and compliance with the Standards is possible for both CFP® professionals with fee-based practices and those who are commission- or salary-based. Regardless of a CFP® professional’s compensation arrangement or business model, the Standards require a CFP® professional to obtain any licenses or registrations required by Federal or State authorities for the specific activities in which that individual is engaged. [See Rule 4.3] The Standards also require disclosure of material information about a CFP® professional’s business model and the compensation arrangement related to the client engagement. [See Rules 1.2 and 2.2]

Question 1-8: What types of activities are considered “material elements of financial planning”?

CFP Board’s Disciplinary and Ethics Commission provides the following guidelines to help CFP® professionals determine when their activities are considered financial planning or material elements of financial planning.

The primary factors on which CFP Board relies for determining whether "material elements" exist are:

  1. The client's understanding and intent in engaging the CFP® professional
  2. The degree to which multiple financial planning subject areas are involved
  3. The comprehensiveness of data gathering
  4. The breadth and depth of recommendations

Activities that CFP Board would likely consider to be material elements of financial planning include:

  1. Conducting detailed data-gathering regarding multiple aspects of a client's financial situation
  2. Analyzing a client's data and making recommendations across multiple financial planning subject areas
  3. Providing investment advisory services as defined by the applicable State or Federal regulators

Activities that CFP Board would not likely consider to be material elements of financial planning include:

  1. Opening an account or completing an application
  2. Fact-finding to meet regulatory requirements for suitability such as the "Know Your Customer" rules
  3. Solely providing brokerage and/or insurance products or services
  4. Engaging in activity solely related to the sale of a specific product
  5. Acting as a mortgage broker without providing any other financial services
  6. Completing tax returns without providing any other financial services
  7. Teaching a financial class or continuing education program

The above are examples and should not be considered an all-inclusive list.

These guidelines are designed to be helpful to CFP® professionals in reviewing their activities and determining whether they are providing material elements of financial planning. CFP Board’s Disciplinary and Ethics Commission also relies on these guidelines when reviewing allegations of misconduct by CFP® professionals.

Question 1-9: How can CFP® professionals determine when a specific service or activity rises to the level of financial planning?

Under CFP Board’s definition of “financial planning,” as found in the Standards, CFP® professionals are able to determine when they are providing services using the material elements of financial planning by considering, among other things, the degree to which multiple financial planning subject areas are involved. While it is more likely for financial planning to exist when multiple subject areas are involved, in some circumstances a financial planning engagement may exist even when a single subject area is involved.

CFP® professionals should consider whether the client’s understanding and intent in engaging the CFP® professional would give the client reason to believe the services provided are financial planning. CFP® professionals should also consider the comprehensiveness of their data gathering with a client and the breadth and depth of their recommendations to a client.

When determining whether a financial planning engagement exists, the entirety of a client relationship should be examined. These questions may guide that determination:

  1. Is the CFP® professional involving the steps of the financial planning process in the services provided?
  2. How many financial planning subject areas are involved to meet the client's goals?
  3. With respect to the services provided, what did the CFP® professional communicate to the client?

Financial planning often does not occur in neat boxes but is a process that progresses and evolves over the course of a financial planner’s relationship with a client.  For example, answering a question of a specific nature – such as “How much money do I need to set aside each month to send my two-year-old to Notre Dame in sixteen years?” – would probably not be considered financial planning.  However, answering a broader question that involves multiple aspects of a client’s situation – such as “How much do I need to save so I’ll have a secure retirement?” – would likely rise to the level of financial planning because of the expansiveness of the financial considerations involved.

Question 1-10: What should I do if I am unsure whether a specific service or activity rises to the level of financial planning?

The question of whether a client relationship involves financial planning is one that CFP Board determines on a case-by case basis. CFP Board encourages CFP® professionals who are unsure if a particular service or client relationship rises to the level of financial planning to embrace CFP Board’s fiduciary standard and provide services in ways they believe are in the best interest of the client.

It is intentional that the terminology section of CFP Board’s Standards does not define “material elements of financial planning.”  In financial planning relationships, products, services, solutions and strategies represent a means to an end – meeting life goals through proper management of financial resources.

It would be impossible to provide guidelines for every possible situation related to financial planning, but CFP Board wants to assist CFP® professionals in complying with the Standards. To submit a particular situation for CFP Board to consider, or to submit questions about specific aspects of the Standards and their application to specific situations, please submit your question to standards@CFPBoard.org.

Question 1-11: What distinctions do the Standards make between financial planning services and other services that don’t rise to the level of financial planning?

The Standards apply to all CFP® professionals, but certain sections of the Rules of Conduct set forth additional requirements for CFP® professionals who provide financial planning services to clients.  When a CFP® professional provides financial planning or material elements of financial planning, the Standards require:

  1. A heightened duty of care to the client;
  2. Additional disclosures to the client or prospective client, including some that must be made in writing; and
  3. A written agreement governing the financial planning services.

The individual Rules related only to client engagements that rise to the level of financial planning or material elements of financial planning are as follows:

Rule 1.4 sets the baseline duty of care CFP® professionals owe at all times to clients: "place the interest of the client ahead of his or her own." That same rule sets forth a heightened duty of care for CFP® professionals who provide to clients financial planning or material elements of financial planning: "the duty of care of a fiduciary as defined by CFP Board." CFP Board's definition of fiduciary is: "One who acts in utmost good faith, in a manner he or she reasonably believes to be in the best interest of the client."

Rule 1.2 describes information that must be disclosed by a CFP® professional to clients and prospective clients if the services to be provided include financial planning or material elements of financial planning.

Rule 2.2 identifies information that must be disclosed by a CFP® professional to all clients and prospective clients, regardless of whether the services to be provided rise to the level of financial planning.  When the services do rise to the level of financial planning or material elements of financial planning, section (e) of Rule 2.2 requires that the disclosures be made in writing.

Rule 1.3 requires that if services to be provided include financial planning or material elements of financial planning, the professional (or the professional’s employer) shall enter into a written agreement with the client governing the financial planning services.

Question 1-12: Does conducting a needs analysis or suitability review reach the level of financial planning or material elements of financial planning?

There are a wide variety of activities that are labeled “needs analysis,” and some of those activities may reach the level of financial planning or material elements of financial planning.  If a “needs analysis” is focused on gathering detailed information about multiple aspects of a client’s financial situation and analyzing that information in light of the client’s stated future goals, or if the analysis is used to make wide-ranging recommendations, that “needs analysis” is considered financial planning. 

In contrast, if a “needs analysis” is focused on a limited component of the client’s financial situation, and does not involve other services related to financial planning, that analysis may not rise to the level of financial planning.  For instance, if a client hires a CFP® professional solely to purchase life insurance, the CFP® professional will by necessity obtain information about the client sufficient to ensure that any policies recommended meet the client’s needs.  If the “needs analysis” is focused solely on factors related to the client’s life insurance needs, that analysis may not rise to the level of financial planning.

A standard suitability review conducted in association with a transaction – a review that takes into consideration such basic elements as the client’s age, net worth and risk tolerance – does not typically reach the level of financial planning or material elements of financial planning. 

The facts and circumstances of each situation are a key factor in CFP Board’s determination of whether a CFP® professional has engaged in financial planning or material elements of financial planning.

Question 1-13: How many elements of the financial planning process can a CFP® professional provide without having those activities constitute “material elements of financial planning”?

A CFP® professional who integrates the financial planning process with two or more subject areas will, in most cases, be providing financial planning or material elements of financial planning.

Under the definition of “financial planning,” the Standards provide guidance CFP® professionals may use to determine whether they are providing financial planning. The factors are:

  1. The client's understanding and intent in engaging the CFP® professional
  2. The degree to which multiple financial planning subject areas are involved
  3. The comprehensiveness of data gathering
  4. The breadth and depth of recommendations

The criteria above focus on the integration of the six steps with two or more financial planning subject areas.

As illustrated in Questions 1-2, a broker who is a CFP® professional and employs all six steps of the financial planning process to recommend a brokerage transaction only would probably not be considered to be providing financial planning services in view of the fact that a single subject area is involved. However, a CFP® professional could inadvertently provide financial planning services by acting in a way that the client reasonably believes that the CFP® professional is providing financial planning. [See Questions 1-3, 1-4, and 1-8] To avoid such situations, the Standards require a CFP® professional to mutually agree upon the services to be provided with each client. [See Rule 1.1] Although a CFP® professional who is providing services other than financial planning is not required to describe the scope of the engagement in writing, it is recommended as a best practice to do so.

Questions 1-2 provides an example of an activity that may be considered to involve material elements of financial planning: conducting detailed data-gathering regarding multiple aspects of a client’s financial situation. This activity may rise to the level of material elements of financial planning if the CFP® professional’s activities include one or more of the following:

  1. Employing multiple financial planning subject areas to analyze a client’s financial situation
  2. Gathering information about a client’s entire financial situation, including goals
  3. Recommending a broad financial plan requiring a depth of technical knowledge to execute the plan
  4. Mutually defining the scope of the engagement with a client where the client understands and intends to engage the CFP® professional in financial planning

Given the in-depth process used in this example, CFP Board would likely consider the CFP® professional in the above-mentioned activity to be providing financial planning or material elements of financial planning.

Question 1-14: How many financial planning subject areas can a CFP® professional address with a client without reaching the level of “material elements of financial planning”?

Applying the financial planning process to a single subject area is not likely to be considered financial planning or material elements of financial planning. CFP® professionals who integrate the financial planning process and two or more subject areas may be providing financial planning or material elements of financial planning.

Under the definition of “financial planning,” the Standards note that one of the factors CFP Board considers in determining whether a financial planning relationship exists is the degree to which multiple financial planning subject areas are involved.

When a CFP® professional’s recommendations involve multiple subject areas and the CFP® professional integrates those subject areas with the steps of the financial planning process, the CFP® professional may be providing material elements of financial planning. It does not matter if these recommendations occur during one meeting with the client, or over several meetings over a period of time.

It is unacceptable for a CFP® professional to employ one product, service module, or subject area at a time in an attempt to avoid having the client relationship be considered financial planning or material elements of financial planning. [See Questions 1-3 and 1-4]

Question 1-15: In situations where a CFP® professional implements financial planning recommendations prepared by a third party, will the CFP® professional’s implementation activities be considered financial planning or material elements of financial planning?

The facts and circumstances of each situation are a key factor in CFP Board’s determination of whether the CFP® professional has engaged in financial planning or material elements of financial planning. The most significant factor that CFP Board will consider in determining whether activities such as implementation rise to the level of financial planning is the client’s understanding and intent in engaging the CFP® professional. If a CFP® professional implements recommendations made by a third party, the degree of specificity in the recommendations is another factor that CFP Board will consider in determining whether the implementation activities constitute financial planning.

If the recommendations are less specific and require the CFP® professional to provide wider-ranging recommendations as part of the implementation process, the CFP® professional’s implementation activities may rise to the level of financial planning. This would be the case if, for example, a client’s tax advisor recommends additional tax-deferred savings and the CFP® professional assists the client to determine the type of deferred savings, the amount to be saved, an investment approach and specific investment vehicles.  By contrast, if the client limits the engagement with the CFP® professional to implementation activities only, the engagement may not rise to the level of financial planning. This would be the case if, for example, the recommendations set out an investment strategy with specific amounts allocated to specific asset classes and the CFP® professional’s actions are limited to executing transactions based on the recommendations identified in the financial plan.

To reduce the possibility of misunderstanding between a CFP® professional and his/her client, CFP Board recommends that all CFP® professionals carefully describe to their clients the services to be provided, particularly where the scope of the engagement is limited. Documenting the scope of the engagement in an agreement or other document can help prevent misunderstanding.

CFP Board encourages CFP® professionals who are unsure whether a particular service or client relationship rises to the level of financial planning to embrace CFP Board’s fiduciary standard and provide services in ways they believe are in the best interest of the client.

Question 1-16: Is a CFP® professional who provides financial planning services more likely to be disciplined by CFP Board than a CFP® professional who does not provide financial planning services?

No. The Standards apply to all CFP® professionals, regardless of the type of services a professional provides to clients, and only four of the 30 Rules in the Rules of Conduct are limited in scope to professionals who provide financial planning services. The Standards do require CFP® professionals who provide financial planning services to provide specific written documentation to a client and to provide services with the duty of a fiduciary, as defined by CFP Board, but the Standards do not state that violations of Rules limited in scope to financial planning services merit harsher discipline than violations of Rules that relate to services other than financial planning.

CFP Board’s Disciplinary Rules and Procedures provide CFP® professionals with a fair and expeditious disciplinary process whenever CFP Board discovers information about a professional’s potentially unethical conduct. As part of the process, CFP Board provides a fair and objective investigation into each allegation and determines the merits of the allegations based on the evidence provided.  The Disciplinary and Ethics Commission (Commission) issues discipline only when the evidence in a specific case substantiates a finding that the Standards have been violated.

The events and context of a situation will affect each of the decisions the Commission makes for a particular case. The Commission considers the severity of a violation and any aggravating or mitigating factors when determining what type of discipline should be issued, not whether the violation relates to a Rule limited in scope to financial planning services.


Did This Answer Your Question?

CFP Board welcomes questions about specific aspects of the Standards of Professional Conduct and their application to specific situations.

CFP Board will consider all questions submitted and draft a response where it determines that interpretation of the Standards is needed.  For responses that it believes would be helpful to all CFP® professionals, CFP Board will publish its response in CFP Board’s newsletters and on CFP Board’s website.

Send your questions and requests for guidance documents to CFP Board at standards@cfpboard.org.

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