Look here to learn more about the specific disclosure requirements when not providing financial planning.
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 firstname.lastname@example.org for consideration and possible inclusion in future revisions of this document.
Question 4-1: What disclosures do the Standards require for client engagements that do not involve financial planning or material elements of financial planning?
Rule 2.2 sets forth the disclosures required of all CFP® professionals when dealing with clients and prospective clients. These disclosures include the following general areas:
- Any compensation that may be related to the client engagement;
- Any conflicts of interest that may affect the client engagement;
- Any relevant information about the CFP® professional or the CFP® professional’s employer; and
- Contact information for the CFP® professional and, if applicable, the CFP® professional’s employer.
The Standards also acknowledge that disclosure is not always a one-time event. As a client engagement evolves over time, perhaps with added or re-structured services, ongoing disclosure is also important. Rule 2.2 makes that clear in its concluding statement: “The CFP® professional shall timely disclose to the client any material changes to the above information.” Rather than follow a periodic annual or semi-annual schedule for repeated disclosures, this provision of Rule 2.2 requires that disclosures be made on an ongoing basis, allowing a client to make informed decisions based on the most current information.
Question 4-2: When, what and how does CFP Board require disclosure to clients and prospective clients when not providing financial planning?
Rules 1.2 and 2.2 of the Standards address the timing, content and manner in which disclosures must be made by a CFP® professional to a client or prospective client. If the CFP® professional does not offer financial planning or material elements of financial planning, the following must be disclosed orally:
- Contact information for the CFP® professional, and the firm with which the CFP® professional is associated;
- Any information about the CFP® professional or the firm with which the CFP® professional is associated that could materially affect the client’s decision to engage the CFP® professional;
- The CFP® professional’s and client’s obligations and responsibilities;
- The compensation that the CFP® professional, the CFP® professional’s firm, and/or any third party may earn;
- How costs of products and services are determined;
- Whether and how the CFP® professional may benefit from the client’s decision;
- If the CFP® professional offers proprietary products and the terms under which such products may be offered; and
- Other likely conflicts of interest.
Written disclosure is not required; however, it is a recommended practice that CFP® professionals provide disclosures in writing.
CFP® professionals should note that Rule 4.3 of the Standards requires compliance with applicable regulatory requirements governing professional services provided to the client.
Question 4-3: Does a CFP® professional who is not providing financial planning or using the financial planning process need to provide clients or prospective clients with written disclosure documents?
No. Rule 2.2 identifies five disclosure items that every CFP® professional must disclose to clients and prospective clients. CFP® professionals, however, are not required to give clients or prospective clients those disclosures in writing unless they are providing financial planning services or material elements of financial planning.
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 email@example.com.
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