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Financial Planning Practice Standards

Overview

Statement of Purpose for Financial Planning Practice Standards

Financial Planning Practice Standards are developed and promulgated by Certified Financial Planner Board of Standards Inc. (CFP Board) for the ultimate benefit of consumers of financial planning services.

These Practice Standards are intended to:

  1. Assure that the practice of financial planning by CERTIFIED FINANCIAL PLANNER™ professionals is based on established norms of practice;
  2. Advance professionalism in financial planning; and
  3. Enhance the value of the financial planning process.

History of Practice Standards

CFP Board is a professional certification and standards-setting organization founded in 1985 to benefit the public by establishing and enforcing education, examination, experience and ethics requirements for CFP® professionals. Through its certification process, CFP Board established fundamental criteria necessary for competency in the financial planning profession.

In 1995, CFP Board established its Board of Practice Standards composed exclusively of CFP® practitioners, to draft standards of practice for financial planning. The Board of Practice Standards drafted and revised the standards considering input from CFP® certificants, consumers, regulators and other organizations. CFP Board's Board of Governors adopted the revised standards.

Description of Practice Standards

A Practice Standard establishes the level of professional practice that is expected of certificants engaged in financial planning.

Practice Standards apply to certificants in performing the tasks of financial planning regardless of the person's title, job position, type of employment or method of compensation. Compliance with the Practice Standards is mandatory for certificants whose services include financial planning or material elements of financial planning, but all financial planning professionals are encouraged to use the Practice Standards when performing financial planning tasks or activities addressed by a Practice Standard.

The Practice Standards are designed to provide certificants with a framework for the professional practice of financial planning. They are not designed to be a basis for legal liability to any third party.

Practice Standards were developed for selected financial planning activities identified in a financial planner job analysis first conducted by CFP Board in 1987, updated in 1994 by CTB/McGraw-Hill, an independent consulting firm, and again in 1999 by the Chauncey Group. The financial planning process is defined as follows:

Financial Planning Process Related Practice Standard
1. Establishing and defining the relationship with a client 100-1 Defining the Scope of the Engagement
2. Gathering client data 200-1 Determining a Client's Personal and Financial Goals, Needs and Priorities
200-2 Obtaining Quantitative Information and Documents
3. Analyzing and evaluating the client's financial status 300-1 Analyzing and Evaluating the Client's Information
4. Developing and presenting financial planning recommendations 400-1 Identifying and Evaluating Financial Planning Alternative(s)
400-2 Developing the Financial Planning Recommendation(s)
400-3 Presenting the Financial Planning Recommendation(s)
5. Implementing the financial planning recommendations 500-1 Agreeing on Implementation Responsibilities
500-2 Selecting Products and Services for Implementation
6. Monitoring 600-1 Defining Monitoring Responsibilities

Format of the Practice Standards

Each Practice Standard is a statement regarding one of the steps of the financial planning process. It is followed by an explanation of the Standard, its relationship to the Code of Ethics and Rules of Conduct , and its expected impact on the public, the profession and the practitioner.

The Explanation accompanying each Practice Standard explains and illustrates the meaning and purpose of the Practice Standard. The text of each Practice Standard is authoritative and directive. The related Explanation is a guide to interpretation and application of the Practice Standard based, where indicated, on a standard of reasonableness, a recurring theme throughout the Practice Standards. The Explanation is not intended to establish a professional standard or duty beyond what is contained in the Practice Standard itself.

Compliance with Practice Standards

The practice of financial planning consistent with these Practice Standards is required for certificants who are financial planning practitioners. The Practice Standards are used by CFP Board's Disciplinary and Ethics Commission and Appeals Committee in evaluating the certificant's conduct to determine if any provision of the Standards of Professional Conduct have been violated, based on the Disciplinary Rules established by CFP Board.

Next: Practice Standards Series 100 >

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