Financial planners deal with one of the most personal and sensitive aspects of your life: personal financial security. Trust is at the heart of the financial planning relationship – trust in the planner’s competence and integrity. If you are relatively new to financial planning, you likely have questions about the process and about how you can make an informed decision concerning the selection of a financial planning professional best suited to your financial goals and objectives. So let’s get started.
How does financial planning work?
Financial planning is a process that determines how you can best meet your life goals through the proper management of your financial affairs. Key to effective financial planning is the ability to take into account all relevant aspects of your financial situation, and to identify and analyze the interrelationships among sometimes conflicting objectives. It is this unique integration of knowledge and skills across a broad range of topics that distinguishes professional financial planning from other related financial advice.
What do the letters “CFP” mean?
The letters “CFP” stand for Certified Financial Planner. The CFP marks identify individuals who are dedicated to the highest level of professionalism in providing financial planning advice. CFP certification assures that the planner adheres to internationally recognized professional standards of competence, practice and ethics as set in Canada by the not-for profit Financial Planners Standards Council (FPSC). CFP standards include requirements in education, examination, experience and adherence to a code of ethics – commonly known as the 4Es of professionalism.
Why is it important to deal with a CFP professional?
Most provinces do not regulate the use of the term “financial planner.” CFP certification is your assurance that your planner has completed a rigorous course of study approved by FPSC, passed the only independently developed national comprehensive examination for financial planning, and is committed to ongoing professional development and adherence to the professional Code of Ethics and Financial Planning Practice Standards developed and enforced by FPSC.
What standards guide the professional conduct of a CFP professional?
CFP professionals follow a professional code of ethics and practice standards described in detail below under the title: “What assurance do I have that financial planning is working for me?” The Code of Ethics requires each CFP professional to adhere to ethical and behavioral principles that ensure the client’s best interests are always placed first. The Financial Planning Practice Standards describe what should happen during the financial planning process, providing guidance on how the Code of Ethics is practically applied in every financial planning situation each step of the way.
What is Financial Planners Standards Council (FPSC)?
FPSC is the not-for-profit organization dedicated to benefiting the public by leading the development of the financial planning profession in Canada. It sets, enforces and promotes the highest competency and ethical standards in financial planning as defined by individuals who have earned CFP certification. FPSC grants the use of the CFP marks (CFP®, CERTIFIED FINANCIAL PLANNER®, ) to individuals who meet its standards. FPSC is supported by the following organizations whose members deal with the personal financial affairs of Canadians: Advocis; The Canadian Institute of Chartered Accountants; The Canadian Institute of Financial Planning; Certified General Accountants of Canada; Certified Management Accountants of Canada; and Credit Union Knowledge Network.
“What assurance do I have that financial planning is working for me?”
All CFP professionals adhere to the CFP™ Code of Ethics.
The CFP™ Code of Ethics requires each CFP professional to adhere to ethical and behavioral principles that ensure your best interests are always placed first.
Principle 1: Integrity
A CFP professional shall always act with integrity. CFP professionals may be placed in positions of trust and confidence by clients. The ultimate source of such public trust is the CFP professional’s personal integrity. In deciding what is right and just, a CFP professional should rely on his or her integrity as the appropriate touchstone. Integrity demands honesty and candor that must not be subordinated to personal gain and advantage. Within the characteristic of integrity, allowance can be made for legitimate difference of opinion; but integrity cannot co-exist with deceit or subordination of one’s principles. Integrity requires the CFP professional to observe not only the letter but also the spirit of this Code.
Principle 2: Objectivity
A CFP professional shall be objective in providing financial planning to clients. Objectivity requires intellectual honesty and impartiality. It is an essential quality for any professional. Regardless of the particular service rendered or the capacity in which a CFP professional functions, a CFP professional should protect the integrity of his or her work, maintain objectivity, and avoid the subordination of his or her judgment, which would be in violation of this Code.
Principle 3: Competence
A CFP professional shall provide services to clients competently and maintain the necessary knowledge and skill to continue to do so in those areas in which the CFP professional is engaged. One is competent only when one has attained and maintained an adequate level of knowledge and skill, and applies that knowledge effectively in providing services to clients. Competence also includes the wisdom to recognize the limitations of that knowledge and when consultation or client referral is appropriate. A CFP professional, by virtue of having earned the CFP credential, is deemed to be qualified to practice financial planning. However, in addition to acquiring the core competencies, knowledge and experience, a CFP professional shall make a commitment to continuous learning and professional development.
Principle 4: Fairness
A CFP professional shall perform financial planning in a manner that is fair and reasonable to clients, principals, partners and employers, and shall disclose conflicts of interest in providing such services. Fairness requires impartiality, intellectual honesty and disclosure of conflicts of interest. It involves a subordination of one’s own feelings, prejudices and desires so as to achieve a proper balance of conflicting interests. Fairness is treating others in the same fashion that one would want to be treated and is an essential trait of any professional.
Principle 5: Confidentiality
A CFP professional shall maintain confidentiality of all client information. A client, by seeking the services of a CFP professional, expects to develop a relationship of personal trust and confidence. This type of relationship must be built upon the understanding that information supplied to the CFP professional will be confidential. To provide financial planning effectively and to protect the client’s privacy, the CFP professional shall safeguard the confidentiality of such information.
Principle 6: Professionalism
A CFP professional’s conduct in all matters shall reflect credit upon the profession. A CFP professional shall behave in a manner that maintains the good reputation of the profession and its ability to serve the public interest. A CFP professional shall avoid activities that adversely affect the quality of his or her financial planning advice.
Principle 7: Diligence
A CFP professional shall act diligently in providing financial planning. Diligence is the provision of services in a prompt and thorough manner. Diligence also includes proper planning for and supervision of the rendering of professional services.