Flashcard Study System for the CFP Exam: CFP� Test Practice Questions and Review (2020)

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Professional Conduct and Regulation© Mometrix Media - flashcardsecrets.com/cfpCFP Exam xxx.57576.359Describe the Code of Ethics and Professional Responsibility:composition, scope, and compliance.

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Professional Conduct and RegulationThe Code of Ethics and Professional Responsibility is divided into twoparts. The first part covers principles and the second part covers rules.Principles are statements that express in general terms the ethical andprofessional ideals that the CFP Board expects certified financialplanners to exhibit in their professional activities. Basically, theprinciples are designed to provide a source of guidance for CFP Boarddesignees. The rules section, on the other hand, contains descriptions ofthe standards of ethical and professionally responsible behavior that theBoard expects of designees in specific situations. Of course, the variednature of financial planning means that all of the rules will not beapplicable to all designees at all times. The CFP Board does require,however, that all CFP designees adhere to this code at all times.

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Professional Conduct and Regulation© Mometrix Media - flashcardsecrets.com/cfpCFP Exam xxx.57575.848Describe the Code of Ethics and Professional Responsibility:Preamble and applicability.

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Professional Conduct and RegulationThe Code of Ethics and Professional Responsibility, composed andpublished by the Certified Financial Planner Board of Standards, wasadopted to outline the principles and rules that apply to all certifiedfinancial planners. In other words, all those people who use the CFPcertification mark and count themselves as Certified Financial Plannersare bound by these principles and rules. In addition, the Code of Ethicsapplies to those candidates for the CFP certification exam who have beenregistered as such with the CFP Board. The CFP Board of Standardsrecommends that every CFP candidate study the Code thoroughly beforeexamination.

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Professional Conduct and Regulation© Mometrix Media - flashcardsecrets.com/cfpCFP Exam xxx.57576.973Describe the Code of Ethics and Professional Responsibilityterminology: Fee-only, financial planning engagement, andpersonal financial planning.

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Professional Conduct and RegulationThe Code of Ethics and Professional Responsibility defines a number ofterms that are essential to the practice of financial planning. The termfee-only refers to a method of compensation in which the financialplanner receives compensation only from the client and receives nocompensation that depends on the purchase or sale of any financialproduct. A financial planning engagement is said to exist when a client isrelying on the information or services provided by a CFP Board designeeusing the financial planning process. Personal financial planning, alsoknown just as financial planning, refers to the process of determining theproper means for an individual to achieve his or her financial goalsthrough the financial planning process.

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Professional Conduct and Regulation© Mometrix Media - flashcardsecrets.com/cfpCFP Exam xxx.57576.660Describe the Code of Ethics and Professional Responsibilityterminology: client, CFP Board designee, commission,compensation, and conflicts of interest.

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Professional Conduct and RegulationThe Code of Ethics and Professional Responsibility defines a number ofterms that are essential to the practice of financial planning. A client is aperson, persons, or entity who engages a financial planner and for whomprofessional services are rendered. A CFP Board designee is any personwho currently holds a CFP certificate, is a candidate for certification, orhas any entitlement to the CFP certification marks. A commission is thecompensation an agent or broker receives when this compensation iscalculated as a percentage of the amount of his or her sales or purchasetransactions. Conflicts of interest are problems that arise when a CFPBoard designee’s work could be impaired by a personal interest,business relationship, or other circumstances.

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Professional Conduct and Regulation© Mometrix Media - flashcardsecrets.com/cfpCFP Exam xxx.57577.613Describe the Code of Ethics and Professional Responsibilityterminology: personal financial planning subject areas andpersonal financial planning professional.

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Professional Conduct and RegulationThe Code of Ethics and Professional Responsibility defines a number ofterms that are essential to the practice of financial planning. Personalfinancial planning subject areas are the main subject fields in financialplanning. Specifically, these subject areas are financial statementpreparation and analysis; investment planning (including portfoliodesign); income tax planning; education planning; risk management;retirement planning; and estate planning. A personal financial planningprofessional is someone who is able and qualified to offer accurate,honest, and comprehensive financial advice to individuals who are tryingto reach specific financial goals.

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Professional Conduct and Regulation© Mometrix Media - flashcardsecrets.com/cfpCFP Exam xxx.57577.281Describe the Code of Ethics and Professional Responsibilityterminology: Personal financial planning process.

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Professional Conduct and RegulationThe Code of Ethics and Professional Responsibility defines a number ofterms that are essential to the practice of financial planning. Thepersonal financial planning process, sometimes just known as thefinancial planning process, is the process that includes (but is notnecessarily limited to) six basic elements: establishing and defining theclient-planner relationship; gathering client data, objectives, and goals;analyzing and evaluating the client’s financial status; developing andpresenting financial planning recommendations; implementing thefinancial planning recommendations; and, finally, monitoring thefinancial planning recommendations.

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Professional Conduct and Regulation© Mometrix Media - flashcardsecrets.com/cfpCFP Exam xxx.57578.254Describe the Code of Ethics and Professional Responsibility:Rules 101, 102, and 103.

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Professional Conduct and RegulationThe second section of the Code of Ethics and Professional Responsibilitycontains specific rules for handling common financial planningsituations. Rule 101 asserts that a financial planner should not solicitclients through false or misleading communications or advertisements.Rule 102 asserts that a financial planner should not engage in anyconduct that involves dishonesty, fraud, deceit, or misrepresentation.Rule 103 is more complex; it lists the specific responsibilities a Boarddesignee has to his or her clients. These are as follows: acting inaccordance with the authority set forth in the governing legalinstrument; identifying and maintaining records of funds and otherproperty held by a client; delivering any funds or other property towhich the client is entitled; not commingling client funds with thedesignee’s own personal property; and showing the care required of afiduciary.

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