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:
- Assure that the practice of financial planning by CERTIFIED FINANCIAL PLANNER™ professionals is based on established norms of practice;
- Advance professionalism in financial planning; and
- 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.
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