Establishing and Defining the Relationship with the Client
100-1: Defining the Scope of the Engagement
The financial planning practitioner and the client shall mutually
define the scope of the engagement before any financial planning
service is provided.
Explanation of this Practice Standard
Prior to providing any financial planning service, the financial
planning practitioner and the client shall mutually define the
scope of the engagement. The process of "mutually-defining" is
essential in determining what activities may be necessary to
proceed with the engagement.
This process is accomplished in financial planning engagements by:
- Identifying the service(s) to be provided;
- Disclosing the practitioner's material conflict(s) of interest;
- Disclosing the practitioner's compensation arrangement(s);
- Determining the client's and the practitioner's responsibilities;
- Establishing the duration of the engagement; and
- Providing any additional information necessary to define or limit the scope.
The scope of the engagement may include one or more financial
planning subject areas. It is acceptable to mutually define engagements
in which the scope is limited to specific activities. Mutually defining
the scope of the engagement serves to establish realistic expectations
for both the client and the practitioner.
This Practice Standard does not require the scope of
the engagement to be in writing. However, as noted in the "Relationship"
section, which follows, there may be certain disclosures that are
required to be in writing.
As the relationship proceeds, the scope may change by mutual agreement.
This Practice Standard shall not be considered alone,
but in conjunction with all other Practice Standards.
Original version, January 1, 1999. 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 4 - Fairness, Principle 7 - Diligence and Rules 1.1, 1.2, 1.3 and 2.2.
Anticipated Impact of this Practice Standard
Upon the Public
The public is served when the relationship is based upon a mutual understanding of the engagement. Clarity of the scope of the engagement enhances the likelihood of achieving
Upon the Financial Planning Profession
The profession benefits when clients are satisfied. This is more likely
to take place when clients have expectations of the process, which
are both realistic and clear, before services are provided.
Upon the Financial Planning Practitioner
A mutually defined scope of the engagement provides a framework for financial planning by focusing both the client and the
practitioner on the agreed upon tasks. This enhances the potential for positive results.
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