Financial Planning
Practice Standards

CFP Certification Global excellence in financial planningTM

TABLE OF CONTENTSFPSB’s Financial Planning Practice Standards ..................................................................................................... 2
Table: Financial Planning Process/Related Practice Activities ............................................................................ 3
1. Establish and Define the Relationship with the Client ...................................................................................... 4
2. Collect the Client’s Information ........................................................................................................................... 6
3. Analyze and Assess the Client’s Financial Status ............................................................................................. 7
4. Develop the Financial Planning Recommendations and Present Them to the Client .................................... 8
5. Implement the Financial Planning Recommendations ...................................................................................... 9
6. Review the Client’s Situation ............................................................................................................................. 10
Glossary .................................................................................................................................................................. 11

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FPSB’S FINANCIAL PLANNING PRACTICE STANDARDSFPSB has defined standards of performance that:

Establish the level of practice expected of a financial planning professional engaged in the delivery offinancial planning to a client;Establish norms of professional practice and allow for consistent delivery of financial planning byfinancial planning professionals;



Clarify the respective roles and responsibilities of financial planning professionals and their clients infinancial planning engagements; andEnhance the value of the financial planning process.

Financial planning is the process of developing strategies to assist clients in managing their financial affairs
to meet life goals. The process of financial planning involves reviewing all relevant aspects of a client’s
situation across a large breadth of financial planning activities, including inter-relationships among often
conflicting objectives. FPSB’s Financial Planning Practice Standards establish the level of professional
practice reasonably expected of financial planning professionals during financial planning engagements,
regardless of practice type, setting, location or method of compensation. FPSB expects that clients offinancial planning professionals will benefit from a globally accepted set of Practice Standards for financial
planning professionals.
FPSB has incorporated compliance with professional standards of practice into the global standards for CFP
certification. To ensure these practice obligations are understood, FPSB Members incorporate content onpractice standards, and their application, into territory-specific CFP certification standards. FPSB Members
further adapt and enforce FPSB’s practice standards in their respective territories.
Format of the Practice Standards
Each Practice Standard is a statement that relates to an element of the financial planning process. The
statement is followed by an explanation of the Practice Standard’s intent, which guides interpretation andapplication of the Practice Standard (based on a standard of reasonableness). The explanation is notintended to establish a professional standard or duty beyond what is contained in the Practice Standard
itself.
The Practice Standards are not intended to prescribe the services to be provided or step-by-step proceduresfor providing any particular service. The financial planning process is an integrated one; functions may be
combined and/or revisited based on the ongoing relationship between the financial planning professional andthe client.
Applicability of the Practice Standards
A financial planning professional should always consider all aspects of the client’s financial situation in
formulating strategies and making recommendations, and should follow these Practice Standards to theextent that they apply to any given situation. At least some of these Practice Standards apply both tocomprehensive financial planning and to the provision of services that only represent one of the components
of financial planning (i.e., Financial Management, Asset Management, Risk Management, Tax Planning,
Retirement Planning and Estate Planning).
Standard 1, dealing with establishing and defining the relationship with the client, applies any time a financial
planning professional provides financial planning or components of financial planning to a client. This serves
to establish clear and appropriate expectations for the client and the financial planning professional.
Standards 2 through 6 apply to the extent that they are relevant to the financial planning engagement (thescope of the engagement document will dictate the applicability of the standards).

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Financial Planning Process

Related Practice Activities

1.Establish and define the relationship with the client.

1.1: Inform the client about financial planning and thefinancial planning professional’s competencies.
1.2: Determine whether the financial planning
professional can meet the client’s needs.
1.3: Define the scope of the engagement.

2. Collect the client’s information.

2.1: Identify the client’s personal and financial
objectives, needs and priorities.
2.2: Collect quantitative information and documents.
2.3: Collect qualitative information.

3. Analyze and assess the client’s financial status.

3.1: Analyze the client’s information.
3.2: Assess the client’s objectives, needs andpriorities.

4. Develop the financial planning recommendations
and present them to the client.

4.1: Identify and evaluate financial planning
strategies.
4.2: Develop the financial planningrecommendations.
4.3: Present the financial planning recommendations
to the client.

5. Implement the client’s financial planningrecommendations.

5.1: Agree on implementation responsibilities.
5.2: Identify and present product(s) and service(s) for
implementation.

6. Review the client’s situation.

6.1: Agree on responsibilities and terms for review of
the client’s situation.
6.2: Review and re-evaluate the client’s situation.

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31. ESTABLISH AND DEFINE THE RELATIONSHIP WITH THE CLIENT
1.1 Inform the client about financial planning and the financial planning professional’s
competencies.
The financial planning professional informs the client about the financial planning process, theservices the financial planning professional offers, and the financial planning professional’s
competencies and experience.
Explanation
Prior to entering into a financial planning engagement with the client, the financial planning
professional helps the client understand the financial planning process and the nature of financial
planning engagements, and provides information on the financial planning professional’s
qualifications. This information may include: how financial planning can help the client meet
objectives; a description of the financial planning professional’s methodology when providing
financial planning; and information about the financial planning professional’s licenses, experienceand expertise. The financial planning professional provides to the client, as required, information
about the services the financial planning professional provides as well as what charges may be
incurred by the client.
1.2 Determine whether the financial planning professional can meet the client’s needs.
The financial planning professional and the client determine whether the services offered by thefinancial planning professional and his or her competencies meet the needs of the client. The
financial planning professional considers his or her skills, knowledge and experience in providing theservices requested or likely to be required by the client. The financial planning professional
determines if he or she has, and discloses, any conflict(s) of interest.
Explanation
The financial planning professional considers if he or she, or his or her staff, has the appropriate
abilities, skills and knowledge to meet the client’s expectations. The financial planning professional
considers if there are any personal conflicts that would affect his or her ability to work successfully
with the client. The financial planning professional determines if there are any other circumstances,
relationships or facts that would place the interest(s) of the financial planning professional in conflictwith the client’s interest(s), or the interest(s) of one client in conflict with another client. The financial
planning professional discusses the confidentiality of the client’s information.
1.3 Define the scope of the engagement.
The financial planning professional and the client agree on the services to be provided. The financial
planning professional describes, in writing, the scope of the engagement before any financial
planning is provided, including details about: the responsibilities of each party (including third
parties); the terms of the engagement; and compensation and conflict(s) of interest of the financial
planning professional. The scope of the engagement is set out in writing in a formal document signedby both parties or formally accepted by the client and includes a process for terminating theengagement.
Explanation
Mutually defining the scope of the engagement establishes realistic expectations for both the client
and the financial planning professional. The financial planning professional and the client may agree
that the scope of the engagement covers one, several or all of the Financial Planning Components(i.e., Financial Management, Asset Management, Risk Management, Tax Planning, Retirement
Planning and Estate Planning).

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A written document ensures mutual understanding and agreement between the financial planning
professional and the client about the terms of the financial planning engagement. In setting out theterms in an engagement letter or disclosure document, the financial planning professional includes
the following:Specific services to be included or excluded, such as implementation and review;

The financial planning professional’s compensation arrangements with respect to theengagement, including fees to be paid by the client;Existing conflicts of interest, including those involving compensation arrangements with third
parties, and agreement to disclose subsequent conflicts of interest if or when they occur;Specific parties to the engagement, including details of any legal and agency relationships
which may exist;

Assurance of protection of client confidentiality;

Duration of the engagement;

The client’s responsibilities, including the full and timely disclosure of information;



The financial planning professional’s responsibilities;



Provisions for terminating the client engagement; andProcedures for resolving the client’s claims and complaints against the financial planning
professional.

Additional information that may form part of the formal written document includes:The potential need to use other professionals during the engagement;An explanation of qualifications, licenses and experience of individuals who will work with theclient;Specific limitations on the use of client information; and

Any other information necessary to adequately inform the client.

Circumstances may change the financial planning professional’s ability to provide services to theclient, or the client may decide to terminate services or transfer to another professional. The financial
planning professional disengages the client or facilitates the client’s transfer to another adviser in a
professional manner.

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2. COLLECT THE CLIENT’S INFORMATION
2.1 Identify the client’s personal and financial objectives, needs and priorities.
The financial planning professional and the client identify the client’s personal and financial
objectives, needs and priorities that are relevant to the scope of the engagement before making
and/or implementing any recommendations.
Explanation
The financial planning professional strives to clearly understand the client’s current situation andfinancial objectives, needs and priorities. The client’s financial objectives state intent, provide
guidance and bring structure to the financial planning engagement. The financial planning
professional assists the client in clarifying and prioritizing his/her short and long-term objectives, anddiscusses with the client the merit and feasibility of any objectives that appear to be unrealistic.
2.2 Collect quantitative information and documents.
The financial planning professional collects sufficient quantitative information and documents about
the client relevant to the scope of the engagement before making and/or implementing any
recommendations.
Explanation
The financial planning professional strives to collect complete and accurate client information anddocuments relevant to the scope of the engagement. The financial planning professional relies on
information provided by the client and other sources to make appropriate recommendations andclearly communicates to the client the importance of collecting complete, current and accurate
information. In return, the financial planning professional respects the confidentiality of, andsafeguards, client documents. If the financial planning professional is unable to collect informationnecessary to develop and support recommendations, the financial planning professional discusses
this with the client, explaining how these limitations impact the engagement and the financial plan.
These limitations could result in a revised engagement document or in termination of theengagement.
2.3 Collect qualitative information.
The financial planning professional collects sufficient qualitative information about the client relevantto the scope of the engagement before making and/or implementing any recommendations.
Explanation
The financial planning professional gathers information to understand the client’s values, attitudes,
expectations and financial experiences. This includes asking questions of the client and employing
appropriate listening skills. The financial planning professional determines the client’s level ofsophistication and financial literacy. These areas are subjective and the financial planning
professional’s interpretation may be limited by what the client reveals.

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3. ANALYZE AND ASSESS THE CLIENT’S FINANCIAL STATUS
3.1 Analyze the client’s information.
The financial planning professional analyzes the client’s information, subject to the scope of theengagement, to gain an understanding of the client’s financial situation.
Explanation
The financial planning professional analyzes the client’s current situation and information, and works
with the client to resolve obvious omissions and/or inconsistencies in the information collected. Aspart of this analysis, the financial planning professional uses client-specified, mutually agreed upon
objectives and other reasonable assumptions, which may include the client’s retirement age, life
expectancy, income needs, risk factors, time horizon and special needs, as well as economic
assumptions such as inflation rates, tax rates and investment returns.
3.2 Assess the client’s objectives, needs and priorities.
The financial planning professional assesses the strengths and weaknesses of the client’s current
financial situation and compares them to the client’s objectives, needs and priorities.
Explanation
The financial planning professional considers the opportunities and constraints presented by theclient’s financial situation and current course(s) of action, and determines the likelihood of the client
reaching his or her objectives by continuing present activities or making anticipated changes. The
financial planning professional may identify other issues that may impact the client’s ability toachieve objectives, which he or she discusses with the client. It may be appropriate for the financial
planning professional to amend the scope of the engagement and/or to obtain additional information.

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4. DEVELOP THE FINANCIAL PLANNING RECOMMENDATIONS AND PRESENT THEM TO THE
CLIENT
4.1 Identify and evaluate financial planning strategies.
The financial planning professional considers one or more strategies relevant to the client’s current
situation that could reasonably meet the client’s objectives, needs and priorities.
Explanation
The financial planning professional identifies alternative strategies for achieving the client’s
confirmed objectives. The financial planning professional evaluates the ability of each strategy toreasonably address the client’s objectives, needs and priorities. This evaluation may involve
discussing with the client the importance, priority and timing of the client’s objectives and needs;
considering multiple assumptions; and/or conducting research or consulting with other professionals.
This process may result in a single strategy, multiple strategies or no change to the client’s current
course(s) of action. In considering alternative strategies, the financial planning professional takes
into account his or her legal and/or regulatory limitations or requirements and his or her competence
to address each of the client’s objectives, needs and priorities. More than one strategy may meet theclient’s objectives, needs and priorities. Strategies and consequences identified by the financial
planning professional may differ from those of other practitioners or advisers, illustrating the
subjective nature of exercising professional judgment.
4.2 Develop the financial planning recommendations.
The financial planning professional develops the financial planning recommendations based on theselected strategies to reasonably meet the client’s confirmed objectives, needs and priorities.
Explanation
After identifying and evaluating various strategies and the client’s current course(s) of action, thefinancial planning professional develops financial planning recommendations that can reasonably
meet the client’s objectives, needs and priorities. The recommendations may be an independentaction or a combination of actions which may need to be implemented collectively. The
recommendations may be to continue the current course(s) of action. If the financial planning
professional recommends a change, it may be general or specific in nature. It may be necessary forthe financial planning professional to recommend that the client modify an objective, need or priority.
The recommendations developed by the financial planning professional may differ from those ofother practitioners or advisers, yet each may reasonably meet the client’s objectives, needs andpriorities. It is important that this part of the financial planning process be sufficiently documented.
4.3 Present the financial planning recommendations to the client.
The financial planning professional presents the financial planning recommendations and the
supporting rationale in a way that allows the client to make an informed decision.
Explanation
When presenting the financial planning recommendations, the financial planning professional helps
the client understand the client’s current situation, the factors and assumptions that were critical to
the recommendation(s), the risks of the recommended strategy(ies), and the likely impact of therecommendation(s) on the client’s ability to meet his/her objectives. The financial planning
professional avoids presenting his or her opinion as fact. The financial planning professional informs
the client that the financial planning recommendations will likely need to be modified as the client’s
personal, economic and other conditions change. The financial planning professional discloses to theclient any conflict(s) of interest not previously disclosed, and explains how such conflicts impact thefinancial planning recommendations. At this stage of the financial planning process, the financial
planning professional can further assess whether the financial planning recommendations meet theclient’s expectations, whether the client is willing to act on the recommendation(s), and whether
modifications are necessary.

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5. IMPLEMENT THE FINANCIAL PLANNING RECOMMENDATIONS
5.1 Agree on implementation responsibilities.
The financial planning professional and the client agree on implementation responsibilities that areconsistent with the scope of the engagement, the client’s acceptance of the financial planningrecommendations, and the financial planning professional’s ability to implement the financial
planning recommendations.
Explanation
The financial planning professional gains the client’s agreement on implementation of therecommendations and provides the required documentation. The financial planning professional may
change the scope of the engagement, as originally defined, based on the agreement reached withthe client. The financial planning professional’s responsibilities may include: identifying activities
necessary for implementation; determining respective responsibilities of the financial planning
professional and the client; referring to, and coordinating with, other professionals; sharing client
information as authorized; and selecting and securing products and/or services. If there are conflictsof interest, sources of compensation or material relationships with other professionals that have notbeen previously disclosed, the financial planning professional discloses these to the client. The
financial planning professional explains the rationale for referrals and the qualification(s) of thereferred professional(s). If a financial planning professional is engaged by the client to provide only
the implementation step of the financial planning process, this is clearly defined in writing in thescope of the engagement. This scope may include the extent to which the financial planning
professional relies on information, analysis or recommendations provided by others.
5.2 Identify and present product(s) and service(s) for implementation.
Based on the scope of the engagement, the financial planning professional identifies and presents
appropriate product(s) and service(s) that are consistent with the financial planningrecommendations accepted by the client.
Explanation
The financial planning professional investigates and recommends products or services that aresuitable to the client’s financial situation and reasonably address the client’s objectives, needs andpriorities. The financial planning professional uses professional judgment in identifying the products
and services that are in the client’s interest. Professional judgment incorporates both qualitative andquantitative information. Solutions identified by the financial planning professional may differ fromthose of other professionals since more than one product or service may meet the client’s needs.
The financial planning professional makes all disclosures to the client required by applicableregulations. Recommendations regarding products or services may be presented concurrently withthe financial planning strategies and recommendations.

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96. REVIEW THE CLIENT’S SITUATION
6.1 Agree on responsibilities and terms for review of the client’s situation.
The financial planning professional and client mutually define and agree on terms for reviewing andreevaluating the client’s situation, including goals, risk profile, lifestyle and other relevant changes.
Explanation
The financial planning professional communicates to the client that financial planning is a dynamic
process that may require updates due to changes in the client’s personal, economic or otherconditions. The financial planning professional and the client mutually agree on, and understand,their respective roles, if any, in ensuring that the client’s situation is being adequately reviewed. The
financial planning professional defines and communicates to the client the nature and scope of thereviewing activities that the financial planning professional will provide. The reviewing process may
require the financial planner professional to modify the original scope of engagement or initiate a
new engagement.
6.2 Review and re-evaluate the client’s situation.
If conducting a review, the financial planning professional and the client review the client’s situation
to assess progress toward achievement of the objectives of the financial planning recommendations,determine if the recommendations are still appropriate, and confirm any revisions mutuallyconsidered necessary.
Explanation
The review process may include: confirming that the financial planning recommendations agreed onby the client and the financial planning professional have been implemented; assessing progress
toward and achievement of the objectives of the financial planning recommendations to date; reevaluating initial or subsequent assumptions made by the financial planning professional forreasonableness; determining whether changes in the client’s circumstances or objectives require
adjustments to the financial plan; and mutually agreeing on any required changes. As circumstancesand needs change, a financial planning professional may need to revisit earlier steps in the financial
planning process.

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GLOSSARY
Client A person, persons or related entities with whom the financial planning professional has a formalplanner client relationship.
Compensation Any non-trivial economic benefit, whether monetary or non-monetary, that a financial
planning professional or related party receives or is entitled to receive for providing professional activities.
Comprehensive Financial Planning The process of developing strategies to assist clients in managing
their financial affairs to meet life goals, integrating across the six Financial Planning Components (i.e.,
Financial Management, Asset Management, Risk Management, Tax Planning, Retirement Planning andEstate Planning).
Financial Planning The process of developing strategies to assist clients in managing their financial affairs
to meet life goals. In practice, financial planning involves reviewing all the relevant aspects of the client’s
current situation and comparing them with the client’s desired situation, then designing a plan to assist
clients to reach their goals.
Financial Planning Process The process by which financial planning professionals develop strategies toassist clients in managing their financial affairs to meet life goals which includes: 1) Establishing and defining
the relationship with the client; 2) Collecting the client’s information; 3) Analyzing and assessing the client’s
financial status; 4) Developing the financial planning recommendations and presenting them to the client; 5)
Implementing the client’s financial planning recommendations; and 6) Reviewing the client’s situation.
Sufficient Information All relevant information necessary for the financial planning professional to make an
informed analysis and recommendation.
Terms of Review The frequency, scope, applicable fees and other conditions relevant to the financial
planning professional’s review and re-evaluation of the client’s situation.

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