Practice Standards
Topic 77: Practice Standards
 Learning Objectives
 Describe the Practice Standards employed during each
step of the financial planning process.
 Integrate the Practice Standards in developing and
communicating a financial plan for a client.
Topic 77: Practice Standards
 Topics
 Purpose and application
 Content
 Enforcement
Topic 77: Purpose and Application
 The purposes of the Practice Standards of the CFP
Board are:
 To assure that the practice of financial planning by those
subject to them is based on agreed upon norms
 To advance professionalism in financial planning, and
 To enhance the value of the personal financial planning
process.
 They apply only to CFP® certificants who engage in
personal financial planning
Topic 77: Content
 Content
 Give specificity to each of the steps in the financial
planning process
 Do not prescribe a detailed, step-by-step procedure for
doing financial planning
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Not designed to serve as a basis for legal liability
Topic 77: Practice Standards
 100-1: Defining the Scope of the Engagement
 200-1: Determining a Client’s Personal and Financial Goals,
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Needs, and Priorities
200-2: Obtaining Quantitative Information and Documents
300-1: Analyzing and Evaluating the Client’s Information
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)
500-1: Agreeing on Implementation Responsibilities
500-2: Selecting Products and Services for Implementation
600-1: Defining Monitoring Responsibilities
Practice Standard 100-1
 100-1: Defining the Scope of the Engagement
 Identifying the services that will be provided
 Disclosing any material conflicts of interest
 Describing how the planner will be compensated
 Identifying the specific responsibilities of both the
planner and the client
 Deciding on the time frame of the engagement
 Discussing any other matters needed to define or limit
the engagement’s scope
Practice Standard 200-1
 200-1: Determining a Client’s Personal and
Financial Goals, Needs, and Priorities
 Prior to any recommendations
 Mutually define
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Personal and financial goals
Needs and priorities
 Assess
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Client’s values, attitudes and expectations
Determining the client’s time horizons.
Practice Standard 200-2
 200-2: Obtaining Quantitative Information and
Documents
 Determine and obtain the quantitative information and
documents that are sufficient and relevant.
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Financial resources, obligations and personal situation.
 If unable to obtain the information
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Restrict the scope of the engagement
Terminate the engagement
Practice Standard 300-1
 300-1 Analyzing and Evaluating the Client’s
Information
 Personal Assumptions
 Retirement age, life expectancy, income needs, etc.
 Economic Assumptions
 Inflation, tax rates, investment returns, etc.
 SWOT
 Strengths
 Weaknesses
 Opportunities
 Threats
Practice Standards 400-1
 400-1: Identifying and Evaluating Financial
Planning Alternatives
 What is possible?
 Recognize areas of expertise and limitations
 Inclusions of other professionals
 Consider viable alternatives
Practice Standards 400-2
 400-2: Developing the financial planning
recommendations
 May be an independent action or a combination of
actions
 Be consistent with previous steps of the financial
planning process
 May differ from those of other practitioners or advisers,
yet each may reasonably meet the client’s goals, needs
and priorities.
Practice Standards 400-3
 400-3: Presenting the financial planning
recommendations
 Assist the client in understanding
 Current situation
 The recommendation itself
 Its impact on the ability to meet the client’s goals, needs and
priorities.
 Avoid presenting the practitioner’s opinion as fact.
 Revisit conflicts of interest
 Do they meet client’s expectations
 Is the client willing to act?
Practice Standard 500-1
 500-1: Agreeing on Implementation Responsibilities
 Identifying activities necessary for implementation
 Determine the division of activities between the practitioner
and the client
 Refer and coordinate with other professionals
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Disclose conflicts of interest, sources of compensation or material
relationships if not done prior
Indicate the basis on which the practitioner believes the other
professional or adviser may be qualified.
Share only authorized information
 Selecting and securing products and/or services.
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Further disclosure if necessary
Practice Standard 500-2
 500-2: Selecting Products and Services for
Implementation
 Investigate products or services that reasonably address
the client’s needs.
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Suitable to the client’s financial situation and consistent with
the client’s goals, needs and priorities.
Must be in the client’s best interest.
 Products and services may differ from those of other
practitioners or advisers.
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Must reasonably meet the client’s goals, needs and priorities.
 Further disclosure if necessary
Practice Standard 600-1
 600-1: Defining Monitoring Responsibilities
 What is to be monitored by the planner
 The conditions and frequency the monitoring will occur
 The methods of communication to the client
 Source of compensation
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May require a new agreement letter and further disclosure
Topic 77: Enforcement
 Non-conformity of the Practice Standards can lead to
same penalties as Code of Ethics violations