GUIDELINES FOR PROFESSIONAL ETHICAL CONDUCTSociety of Financial Services Professionals – Central Illinois Chapter

Society of Financial Services Professionals A multidisciplinary network of

credentialed financial professionals. Committed to providing education

opportunities National website – www.financialpro.org Chapter website – www.fsp-centralil.org

Purpose

Understand the CFP Board Code of Ethics & Professional Responsibility.

Understand relationship between CFP Board Code and FSP Code.

Foster awareness of ethical issues in the profession.

Resolve “gray” areas using ethical decision making skills.

Agenda

Ethics and Professional Responsibility CFP Board Code of Ethics & Professional

Responsibility Comparison of CFP Board Code and FSP

Code Ethical Decision Making Tool Case Application

Common Sense Ethics

Doing the Right Thing: Rules, Principles and Respect

Character: Values and Identity Sound Judgment: Using your Head

Professional Ethics

CHARACTER

INDIVIDUAL

PROFESSIONALSOCIETY

Copyright 1993 Resources for Ethics and Management

DECISIONMAKING SKILLS

PERSONAL VALUES

andIDENTITY

VALUESTRADITIONSLEADERSHIP

SOUNDJUDGMENT

STANDARDSPRACTICESRESOURCES

CFP Board Code of Ethics & Professional Responsibility

Applicability of the Code Scope of the Code Compliance & Terminology Principles Rules of Conduct and Practice Standards Quiz

Preamble & Applicability

Source = CFP Board of Standards Principles & Rules guide behavior Applies to all CFP Board certificants and

registrants Accepting right to use CFP marks =

Agreeing to be bound by Code

Composition & Scope

Two components: Principles & Rules Building blocks of Code Neither define behavior for purposes of civil

liability Principles

General statements of ethical ideals Aspirational Apply to all CFP Board certificants

Rules Practical and specific to given situations Not all Rules apply to all CFP Board certificants

Principles

Aspirational standards of exemplary professional conduct

CFP Board certificants strive toward that level of professional conduct

1. Integrity

2. Objectivity

3. Competence

4. Fairness

5. Confidentiality

6. Professionalism

7. Diligence

Principles 1, 2 and 3

1. INTEGRITY: A CFP Board certificant shall offer and provide professional services with integrity.

2. OBJECTIVITY: A CFP Board certificant shall be objective in providing professional services to clients.

3. COMPETENCE: A CFP Board certificant shall provide services to clients competently & maintain the necessary knowledge and skill to do so in those areas in which he/she is engaged.

Principles 4 and 5

4. FAIRNESS: A CFP Board certificant shall perform professional services in a manner that is fair and reasonable to clients, principals, partners and employers, and shall disclose conflicts of interest in providing such services.

5. Confidentiality: A CFP Board certificant shall not disclose confidential client information without the specific consent of the client unless In response to legal process To defend against charges of wrongdoing In connection with a civil dispute

Principles 6 and 7

6. PROFESSIONALISM: A CFP Board certificant’s conduct in all matters shall reflect credit upon the profession.

7. DILIGENCE: A CFP Board certificant shall act diligently in providing professional services.

Test Your Knowledge

Bud Boaster, CFP, has a habit of bragging about the net worth of his high-end clients.

Polly Procrastinator, CFP, is known for her extraordinary expertise in asset allocation, but she also has a reputation for not returning calls and missing deadlines.

Charlie Chatter, CFP, heard an unsubstantiated rumor about the financial stability of a local broker-deal firm. Without further investigation, he shared this information with 2 colleagues, 3 clients, and his barber.

Compliance

All CFP Board certificants must comply Drivers for compliance:

Understanding/knowledge of Code Influences of fellow professionals & public

opinion Disciplinary proceedings

FSP Code of Professional Responsibility Background Preamble Canons Rules and Applications Disciplinary Procedures

Background

A professional Possesses knowledge or expertise Serves others Works to enhance reputation Self-regulates

FSP Code introduced in 1961, revised in 1988 and again in 2000.

Changes in financial services Multiple credentials Services beyond insurance New ethical challenges

Preamble

Introduces the Code All FSP members are automatically

bound by its provisions Lofty aspirations (Canons) and

enforceable minimum standards of ethical conduct (Rules)

Diversity of membership Advisory opinions

Canons

Aspirational standards of exemplary professional conduct

Members strive toward that level of professional conduct

Significant similarity to CFP Board Code1. Fairness

2. Competence

3. Confidentiality

4. Integrity

5. Diligence

6. Professionalism

7. Self-Regulation

Canons 1, 2 and 3

1. FAIRNESS: A member shall apply the “Golden Rule” to all he or she serves and especially avoid harm to others.

2. COMPETENCE: A member will earn a high-level of knowledge and will continually improve one’s competence.

3. CONFIDENTIALITY: A member will treat information obtained with the highest level of confidentiality.

Canons 4, 5 and 6

4. INTEGRITY: A member shall always place the client’s interest above his/her own.

5. DILIGENCE: A member must apply his or her skills in a prompt and thorough manner.

6. PROFESSIONALISM: A member has the responsibility to cooperate with other professionals and to enhance the profession’s public image.

Canon 7

7. SELF-REGULATON: A member will uphold and facilitate enforcement of the

Code of Professional Responsibility.

Code Comparison

Society of Financial Service Professionals

1.Fairness

2.Competence

3.Confidentiality

4.Integrity

5.Diligence

6.Professionalism

7.Self Regulation

Certified Financial Planner Board of Standards

1.Integrity

2.Objectivity

3.Competence

4.Fairness

5.Confidentiality

6.Professionalism

7.Diligence

Six Questions Guidelines

1 Why is this bothering me?2 Who else matters? Clients? Carriers?

Professional Colleagues? Employees? Regulators?

3 What is my responsibility?4 What are the ethical concerns? What

Principles/Canons & Rules of the Codes apply?5 Who can I ask for advice?6 Am I being true to myself? To the values of CFP

Board/FSP?

Adapted with permission from Michael Rion, The Responsible Manager, Copyright 1996.

BREAK (10 minutes)

Case Discussion Instructions Read the case. Select a discussion leader and a recorder

who will give a brief report to the whole group.

Discuss and answer the questions at the end of the case.

Agree on key points to present to the whole group.

Financial Planning with Linda

Things to Discuss Updating our wills Rebalancing our taxable investment

portfolio Trusts – do we need something for the

kids? Long term care insurance – now or later?

Summary for Case #1All Things to All People?

Refrain from giving advice in areas beyond the member’s expertise

Abide by all local, state and national laws and regulations affecting professional activities

Summary for Case #2What Would You Like to Know?

Treat the client as you would like to be treated including disclosure of important aspects of the professional relationship.

Establish confidentiality at the outset. Maintain an open, honest relationship.

Summary for Case #3A Little Knowledge

Act only in accordance with authority given by client.

Abide by applicable laws, rules and regulations.

Summary for Case #4Is the Customer Always Right?

Treating others as you would want to be treated and avoiding conflict of interest argue for raising the 401(k) option.

Identifying the 401(k) option suggests competent, objective financial planning.

Honesty builds positive business relationships.

BREAK (10 minutes)

Summary for Case #5What Really Counts?

Treat others as we want to be treated, avoid conflicts of interest and disclose relevant information.

Stay current with the latest business models.

Raise any concerns about transactional approaches in appropriate professional circles.

Summary for Case #6Breaking Up is Hard to Do

Treat all clients as you would like to be treated.

Honor your promises and explain limitations and challenges honestly.

Anticipate the problem and seek creative solutions with advice from others.

Summary for Case #7Mind Your Own Business?

Offer your best advice to the client, even if it is uncomfortable.

Honor confidentiality of the client relationship in talking to other family members.

Make strong efforts to ensure client realizes implications of decision.

Summary for Case #8The Road Not Taken

Ensure that recommendations do not cause harm; if you did cause harm, help to correct it.

Make sure recommendations are appropriate and keep up to date with client needs.

Cooperate fully in any ethics complaint investigations

Summary

Read and understand the Codes. Use the Codes for guidance. Use the Six Questions Guidelines too. Ask for help! Share questions, ideas, information,

application examples.