Certified Financial Planner Board of Standards Inc.

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Practice Standards

Practice Standards 300 Series

Financial Planning Practice Standards Overview
100 Series: Establishing and Defining the Relationship with the Client
200 Series: Gathering Client Data
300 Series: Analyzing and Evaluating the Client's Financial Status
400 Series: Developing and Presenting the Financial Planning Recommendation
500 Series: Implementing the Financial Planning Recommendation(s)
600 Series: Monitoring

Analyzing and Evaluating the Client's Financial Status

300-1: Analyzing and Evaluating the Client's Information

A financial planning practitioner shall analyze the information to gain an understanding of the client's financial situation and then evaluate to what extent the client's goals, needs and priorities can be met by the client's resources and current course of action.

Explanation of this Practice Standard

Prior to making recommendations to a client, it is necessary for the financial planning practitioner to assess the client's financial situation and to determine the likelihood of reaching the stated objectives by continuing present activities.

The practitioner will utilize client-specified, mutually agreed upon, and/or other reasonable assumptions. Both personal and economic assumptions must be considered in this step of the process. These assumptions may include, but are not limited to, the following:

Personal assumptions, such as: retirement age(s), life expectancy(ies), income needs, risk factors, time horizon and special needs; and
Economic assumptions, such as: inflation rates, tax rates and investment returns.

Analysis and evaluation are critical to the financial planning process. These activities form the foundation for determining strengths and weaknesses of the client's financial situation and current course of action. These activities may also identify other issues that should be addressed. As a result, it may be appropriate to amend the scope of the engagement and/or to obtain additional information.

Effective Date

Original version, January 1, 2000. Updated version, January 1, 2002.

Relationship of this Practice Standard to CFP Board's Code of Ethics and Professional Responsibility

This Practice Standard relates to CFP Board's Code of Ethics and Professional Responsibility (Code of Ethics) through the Code of Ethics' Principle 2 - Objectivity and Rules 201 and 202; Principle 3 - Competence and Rule 302, and Principle 7 - Diligence and Rule 701.

Principle 2 states "A CFP Board designee shall be objective in providing professional services to clients." Rule 201 states "A CFP Board designee shall exercise reasonable and prudent professional judgment in providing professional services" and Rule 202 states "A financial planning practitioner shall act in the interest of the client."

Principle 3 states "A CFP Board designee shall provide services to clients competently and maintain the necessary knowledge and skill to continue to do so in those areas in which the designee is engaged." Rule 302 states "A CFP Board designee shall offer advice only in those areas in which the CFP Board designee has competence. In areas where the CFP Board designee is not professionally competent, the CFP Board designee shall seek the counsel of qualified individuals and/or refer clients to such parties."

Under Principle 7, Rule 701 states "A CFP Board designee shall provide services diligently."

Anticipated Impact of this Practice Standard

Upon the Public

The public is served when objective analysis and evaluation by a financial planning practitioner results in the client's heightened awareness of specific financial planning issues. This Practice Standard is intended to increase the likelihood of achieving the client's goals and objectives.

Upon the Financial Planning Profession

Objective analysis and evaluation enhances the public's recognition of and appreciation for the financial planning process and increases the confidence in financial planning practitioners who provide this service.

Upon the Financial Planning Practitioner

Analysis and evaluation helps the practitioner establish the foundation from which recommendations can be made that are specific to the client's financial planning goals, needs and priorities.