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Case Study
The Duty to Communicate Team Member Responsibilities
CFP Board has developed a series of case studies to provide practical guidance to CFP® professionals and their firms on the new Code and Standards. Each case study presents a hypothetical factual circumstance and then asks a question about a CFP® professional’s duty in that circumstance under the Code and Standards.
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Watch Animated Video Darnell, a CFP® professional, and Robert, a relationship manager who is not a CFP® professional, work as members of a team at ABC Financial Services Company. A Client has engaged ABC to provide Financial Advice. Darnell and Robert will be working together to formulate and deliver the Financial Advice. ABC does not have policies that identify the respective roles and responsibilities of the various team members.
Question
As a member of a team, what is Darnell required to do when providing Professional Services to a Client?
Response Options
A. Darnell’s only responsibility is to follow the Financial Advice Engagement, because the Scope of Engagement is the only source of a CFP® professional’s responsibilities.
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Response A is not the best response because a CFP® professional’s responsibilities extend beyond those that are set forth in the Scope of the Engagement. A CFP® professional also must comply with the requirements set forth in the Code and Standards.
B. Darnell must communicate with Robert about how the responsibilities will be allocated between them and determine the scope of services that each person will provide to the Client.
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Best Response: Response B is the best response. This case study involves the Fiduciary Duty (Standard A.1.).
At all times when providing Financial Advice to a Client, a CFP® professional must act as a fiduciary, and therefore, act in the best interests of the Client. The Fiduciary Duty includes the Duty of Loyalty, the Duty of Care, and the Duty to Follow Client Instructions. To fulfill the Duty of Care, a CFP® professional must act with the care, skill, prudence, and diligence that a prudent professional would exercise in light of the Client’s goals, risk tolerance, objectives, and financial and personal circumstances.
When a CFP® professional is working as part of a team to provide Financial Advice to a Client, the Duty of Care requires the CFP® professional to communicate with the other members of the team about the scope of their respective services and the allocation of responsibility between them. This might be satisfied by a firm policy or protocol that identifies their respective responsibilities with respect to the services to be provided.
In this case, Darnell, Robert, and any other members of the ABC team who may provide services to the Client will need to decide who will perform each of the services the Engagement requires. The duty that arises in this case is analogous to the Duty When Working With Additional Persons, set forth in (Standard A.13.b.i.) that applies to persons outside the firm who are providing Professional Services to the Client.
C. Darnell should tell Robert that as the relationship manager, Robert should modify the Financial Advice recommendations if he believes that the Client may want to pursue another course of action.
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Response C is not the best response because the decision to modify a recommendation should not be based upon a “belief” that a Client “may want” to pursue another course of action. Mere speculation is not a proper basis for modifying a recommendation.
READ MORE CASE STUDIES ABOUT THE NEW CODE AND STANDARDS
SEE THE FULL CASE STUDY LISTING
Relevant Standards and Definitions: Fiduciary Duty (Standard A.1.).
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This compliance resource is part of a full library of resources that CFP® professionals can use to comply with the Code and Standards. More guidance materials can be found in our Compliance Resources Library.