Developing and Presenting the Financial Planning Recommendation(s)
Preface to the 400 Series
The 400 Series, "Developing and Presenting the Financial Planning
Recommendation(s)," represents the very heart of financial
planning. It is at this point that the financial planning
practitioner, using both science and art, formulates the
recommendations designed to achieve the client's goals, needs
and priorities. Experienced financial planning practitioners
may view this process as one action or task. However, in reality,
it is a series of distinct but interrelated tasks.
These three Practice Standards emphasize the
distinction among the several tasks which are part of this process.
These Practice Standards can be described as, "What is
Possible?," "What is Recommended?" and "How is it Presented?"
The first two Practice Standards involve the creative thought,
the analysis, and the professional judgment of the practitioner,
which are often performed outside the presence of the client.
First, the practitioner identifies and considers the various
alternatives, including continuing the present course of action
(Practice Standard 400-1). Second, the practitioner develops
the recommendation(s) from among the selected alternatives
(Practice Standard 400-2). Once the practitioner has determined
what to recommend, the final task is to communicate the
recommendation(s) to the client (Practice Standard 400-3).
The three Practice Standards that comprise the 400
series should not be considered alone, but in conjunction with
all other Practice Standards.
400-1: Identifying and Evaluating Financial Planning Alternative(s)
The financial planning practitioner shall consider sufficient
and relevant alternatives to the client's current course of
action in an effort to reasonably meet the client's goals,
needs and priorities.
Explanation of this Practice Standard
After analyzing the client's current situation (Practice Standard 300-1)
and prior to developing and presenting the recommendation(s)
(Practice Standards 400-2 and 400-3) the financial planning practitioner
shall identify alternative actions. The practitioner shall evaluate the
effectiveness of such actions in reasonably meeting the client's goals,
needs and priorities.
This evaluation may involve, but is not limited to, considering
multiple assumptions, conducting research or consulting with other
professionals. This process may result in a single alternative,
multiple alternatives or no alternative to the client's current
course of action.
In considering alternative actions, the practitioner
shall recognize and, as appropriate, take into account his or her
legal and/or regulatory limitations and level of competency in
properly addressing each of the client's financial planning issues.
More than one alternative may reasonably meet the
client's goals, needs and priorities. Alternatives identified
by the practitioner may differ from those of other practitioners
or advisers, illustrating the subjective nature of exercising
professional judgment.
Effective Date
Original version, January 1, 2001. Updated version, January 1, 2002.
Relationship of this Practice Standard to CFP Board's Code of Ethics and Rules of Conduct
This Practice Standard relates to CFP Board's Code of Ethics and Rules of Conduct through
Principle 2 - Objectivity, Principle 3 -
Competence, Principle 6 - Professionalism, Principle 7 - Diligence and Rules 1.4, 4.1 and 4.5.
400-2: Developing the Financial Planning Recommendation(s)
The financial planning practitioner shall develop the recommendation(s)
based on the selected alternative(s) and the current course of action
in an effort to reasonably meet the client's goals, needs and priorities.
Explanation of this Practice Standard
After identifying and evaluating the alternative(s) and the client's
current course of action, the practitioner shall develop the
recommendation(s) expected to reasonably meet the client's goals,
needs and priorities. A recommendation may be an independent action
or a combination of actions which may need to be implemented collectively.
The recommendation(s) shall be consistent with and will
be directly affected by the following:
- Mutually defined scope of the engagement;
- Mutually defined client goals, needs and priorities;
- Quantitative data provided by the client;
- Personal and economic assumptions;
- Practitioner's analysis and evaluation of client's current situation; and
- Alternative(s) selected by the practitioner.
A recommendation may be to continue the current
course of action. If a change is recommended, it may be
specific and/or detailed or provide a general direction.
In some instances, it may be necessary for the practitioner
to recommend that the client modify a goal.
The recommendations developed by the practitioner
may differ from those of other practitioners or advisers,
yet each may reasonably meet the client's goals, needs and priorities.
Effective Date
Original version, January 1, 2001. Updated version, January 1, 2002.
Relationship of this Practice Standard to CFP Board's Code of Ethics and Rules of Conduct
This Practice Standard relates to CFP Board's Code of Ethics and Rules of Conduct through Principle 2 - Objectivity, Principle 3 - Competence, Principle 6 -
Professionalism, Principle 7 - Diligence and
Rules 2.1, 4.1, 4.4 and 4.5.
400-3: Presenting the Financial Planning Recommendation(s)
The financial planning practitioner shall communicate the
recommendation(s) in a manner and to an extent reasonably
necessary to assist the client in making an informed decision.
Explanation of this Practice Standard
When presenting a recommendation, the practitioner shall make
a reasonable effort to assist the client in understanding
the client's current situation, the recommendation itself,
and its impact on the ability to meet the client's goals,
needs and priorities. In doing so, the practitioner shall
avoid presenting the practitioner's opinion as fact.
The practitioner shall communicate the factors
critical to the client's understanding of the recommendations.
These factors may include but are not limited to material:
- Personal and economic assumptions;
- Interdependence of recommendations;
- Advantages and disadvantages;
- Risks; and/or
- Time sensitivity.
The practitioner should indicate that even though
the recommendations may meet the client's goals, needs and
priorities, changes in personal and economic conditions could
alter the intended outcome. Changes may include, but are not
limited to: legislative, family status, career, investment
performance and/or health.
If there are conflicts of interest that have
not been previously disclosed, such conflicts and how they
may impact the recommendations should be addressed at this time.
Presenting recommendations provides the practitioner
an opportunity to further assess whether the recommendations meet
client expectations, whether the client is willing to act on the
recommendations, and whether modifications are necessary.
Effective Date
Original version, January 1, 2001. Updated version, January 1, 2002.
Relationship of this Practice Standard to CFP Board's Code of Ethics and Rules of Conduct
This Practice Standard relates to CFP Board's Code of
Ethics and Rules of Conduct through
Principle 1 - Integrity,
Principle 2 - Objectivity, Principle 6 -
Professionalism and Rules 2.1, 4.1, 4.4 and 4.5.
Anticipated Impact of these Practice Standards
Upon the Public
The public is served when strategies and objective recommendations
are developed and are communicated clearly to specifically meet
each client's individual financial planning goals, needs and
priorities.
Upon the Financial Planning Profession
A commitment to a systematic process for the development and
presentation of the financial planning recommendations advances
the financial planning profession. Development of customized
strategies and recommendations enhances the public's perception
of the objectivity and value of financial planning.
The public will seek out those professionals who embrace these
Practice Standards.
Upon the Financial Planning Practitioner
Customizing strategies and recommendations forms a foundation
to communicate meaningful and responsive solutions. This increases
the likelihood that a client will accept the recommendations and
act upon them. These actions will contribute to client satisfaction.
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