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Practice Guidelines have been developed and
promulgated by FPSB India in line with global guidelines for practice of personal
Financial Planning. These guidelines: (1) assure that the practice of Financial
Planning by CFP is based on agreed upon norms of practice; (2) advance professionalism in Financial Planning; and (3) enhance the value of the personal Financial Planning process. Each Practice Guideline will apply to both CFP and FPSB India Certificants
(collectively known as FPSB India Certificants)
A Practice Guideline establishes the level of
professional practice that is expected of FPSB India Certificants engaged in
personal Financial Planning. The services provided depend on the facts and
circumstances of a particular situation.
Practice Guidelines apply to FPSB India
Certificants while performing the tasks of personal Financial Planning regardless
of the person’s title, job position, type of employment, or method of
compensation. All personal Financial Planning professionals should consider
Practice Guidelines when performing the Financial Planning tasks or activities
addressed by the guideline but are enforceable by FPSB India only against FPSB
India Certificants. Conduct inconsistent with a guideline in and of itself is
not intended to give rise to a cause of action or to create any presumption
that a legal duty has been breached. The guidelines are designed to provide
FPSB India Certificants a structure for identifying and implementing
expectations regarding the professional practice of personal Financial
Planning. They are not designed to be a basis for legal liability.
Practice Guidelines are not intended to prescribe
step-by-step procedures for providing any particular service. Such procedures
may be provided in practice aids developed by various Financial Planning and
other sources.
The practice of Financial Planning consistent with
these guidelines is required for FPSB India Certificants and will be enforced
by FPSB India.
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The scope of engagement shall be mutually defined
by the Financial Planning practitioner and the client prior to providing any
Financial Planning service.
Prior to providing any Financial Planning service, a Financial Planning
practitioner and the client shall mutually define the scope of the engagement.
The process of “Mutually-defining” is essential in determining what activities
may be necessary to proceed with the client engagement. This is accomplished
by:
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Identifying the service(s) to be provided; |
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Disclosing Financial Planning practitioner’s compensation arrangement(s); |
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Determining the clients and the Financial Planning practitioner’s responsibilities; |
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Establishing the duration of the engagement; and |
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Providing any additional information necessary to define or limit the scope. |
The scope of the engagement may include one or
more Financial Planning subject areas. It is acceptable to mutually define
engagements in which the scope is limited to specific activities. This serves
to establish realistic expectations both for the client and the practitioner.
As the relationship proceeds, the scope may change
by mutual understanding.
This Practice Guideline shall not be considered
alone, but in conjunction with all other Practice Guidelines.
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A client’s personal and financial goals, needs and
priorities that are relevant to the scope of the engagement and the service(s)
being provided shall be mutually defined by the Financial Planning practitioner
and the client prior to making and/or implementing any recommendations.
Prior to making recommendations to a client, a Financial Planning practitioner
(practitioner) and the client shall mutually define the client’s personal and
financial goals, needs and priorities. In order to arrive at such a definition,
the practitioner will need to explore client’s values, attitudes, expectations,
and time horizons as they affect the client’s goals, needs and priorities. The
process of “mutually-defining” is essential in determining what activities may
be necessary to proceed with the client engagement. Personal values and
attitudes shape a client’s goals and objectives must be consistent with the
client’s values and attitudes in order for the client to make the commitment
necessary to accomplish them.
Goals and objectives provide focus, purpose,
vision and direction for the Financial Planning process. It is essential that
objectives relative to the scope of engagement are determined and they are
clear, precise, consistent, and measurable. The role of the practitioner is to
facilitate the goal-setting process in order to clarify, with the client, goals
and objectives, and, when appropriate, the practitioner must try to assist
clients in recognizing the implications of unrealistic goals and objectives.
This Practice Guideline addresses only the tasks
of determining a client’s personal and financial goals, needs and priorities;
assessing a client’s values, attitudes and expectations; and determining a
client’s time horizons. These areas are subjective and the practitioner’s
interpretation is limited by what the client reveals. A practitioner performing
the activity of “gathering client data” should consider together the various
Practice Guidelines applicable to such activity.
This Practice Guideline shall not be considered
alone, but in conjunction with all other Practice Guidelines.
A Financial Planning practitioner shall obtain
sufficient and relevant quantitative information and documents about a client
applicable to the scope of the engagement and the services being provided prior
to making and/or implementing any recommendations.
Prior
to making recommendations to a client and depending upon the type of client
engagement and its scope, a Financial Planning practitioner (practitioner)
shall determine what quantitative information and documents are sufficient and
relevant.
A practitioner shall obtain sufficient and
relevant quantitative information and documents pertaining to the client’s
financial resources, obligations, and personal situation. This information may
be obtained directly from the client or other sources through interview,
questionnaire, client records and documents.
A practitioner shall communicate to the client a
reliance on the completeness and accuracy of the information provided and that
incomplete or inaccurate information will impact conclusions and
recommendations, the practitioner shall either:
Restrict the scope of the engagement to those
matters for which sufficient and relevant information is available; or
b) Terminate the engagement
A practitioner shall communicate to the client any
limitations on the scope of the engagement, as well as the fact that this
limitation could affect the conclusions and recommendations.
This practice guideline shall not be considered
alone, but in conjunction with all other practice guideline.
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A Financial Planning practitioner shall analyze
the information to gain an understanding of the client’s financial situation
and then evaluate to what extent the client goals, needs and priorities can be
met by the client’s resources and current course of action.
Prior to making recommendations to a client, it is necessary for the Financial
Planning practitioner to assess the client’s financial situation and to
determine the likelihood of reaching the stated objectives by continuing
present activities.
The practitioner will utilize client specified,
mutually agreed upon, and/or other reasonable assumptions. Both personal and
economic assumptions must be considered in this step of the process. These
assumptions may include, but are not limited to the following:
Personal assumptions, such as: retirement age(s).
life expectancy(ies), income needs, risk factors, time horizon and special
needs; and
Economic assumptions, such as: inflation rates,
tax rates and investment returns.
Analysis and evaluation are critical to the
Financial Planning process. These activities form the foundation for
determining strengths and weakness of the client’s financial situation and
current course of action. These activities may also identify other issues that
should be addressed. As a result, it may be appropriate to amend the scope of
the engagement and/or to obtain additional information.
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The 400 series, Developing and Presenting the
Financial Planning Recommendation(s), represents the very heart of the
Financial Planning process. It is at this point, that the Financial Planning
practitioner using both science and art, formulates the recommendations
designed to achieve the client’s goals, needs and priorities. Experienced
Financial Planning practitioners may view this process as one action or task.
However, in reality, it is a series of distinct
but interrelated tasks.
These three Practice Guidelines emphasize the
distinction among the several tasks which are a part of this process. These
Practice Guidelines can be described as “What is Possible?” “What is
Recommended?” and “How is it Presented?” The first two Practice Guidelines
involve the creative thought, the analysis, and the professional judgment of
the practitioner, which are often performed outside the presence of the client.
First, the practitioner identifies and considers the various alternatives,
including continuing the present course of action – (Practice Guideline 400-1).
Second, the practitioner develops the recommendation(s) from among the selected
alternatives – (Practice Guidelines 400-2). Once the practitioner has
determined what to recommend, the final task is to communicate the
recommendation(s) to the client – (Practice Guideline 400-3).
The three practice guidelines that comprise the
400 series should not be considered alone, but in conjunction with all other
Practice Guidelines.
A Financial Planning practitioner shall consider
sufficient and relevant alternatives to the client’s current course of action
in an effort to reasonably achieve the client’s goals, needs and priorities
After analyzing the client’s current situation (Practice Guideline 300-1) and
prior to developing and presenting recommendation(s) (Practice Guidelines 400-2
and 400-3) the Financial Planning practitioner shall identify alternative
actions. The practitioner shall evaluate the effectiveness of such actions in
reasonably achieving the client’s goals, needs and priorities.
This evaluation may involve, but is not limited
to, considering multiple assumptions, conducting research or consulting with
other professionals. This process may result in a single alternative, multiple
alternatives or no alternative to the client’s current course of action.
In considering alternative actions, the
practitioner also must recognize and, as appropriate. Take into account his or
her legal and/or regulatory limitations and level of competence in properly
addressing each of the client’s Financial Planning issues.
More than one alternative may reasonably achieve
the client’s goals, needs and priorities. Alternatives identified by the
practitioner may differ from those of other practitioners or advisors,
illustrating the subjective nature of exercising professional judgment.
A Financial Planning practitioner shall develop
the recommendation(s) based on selected alternative(s) and the current course
of action in an effort to reasonably achieve the client’s goals, needs and
priorities.
After identifying and evaluating the alternative(s) and the client’s course of
action, the practitioner shall develop recommendation(s) expected to reasonably
achieve the client’s goals, needs and priorities. A recommendation may be
independent action or a combination of actions, which may need to be
implemented collectively. The recommendation(s) shall be consistent with and
will be directly affected by the following:
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Mutually defined scope of engagement; |
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Mutually defined client goals; |
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Quantitative data provided by the client; |
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Personal and economic assumptions; |
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Practitioner’s analysis and evaluation of client’s current situations; and
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Alternative(s) selected by the practitioner. |
A recommendation may be to continue the current
course of action. If a change is recommended, it may be specific and /or
detailed or provide a general direction. In some instances, it may be necessary
for the practitioner to recommend that the client modifies the goal.
The recommendations developed by the practitioner
may differ from those of other practitioners or advisors yet each may
reasonably achieve the client’s goals, needs and priorities.
A Financial Planning practitioner shall
communicate the recommendation(s) in a manner and to extent reasonably
necessary to assist the client in making an informed decision.
When presenting a recommendation, the practitioner shall make a reasonable
effort to assist the client in understanding the client’s current situation,
the recommendation itself, and its impact on the ability to achieve the
client’s goals, needs priorities. In doing so, the practitioner shall avoid
presenting his opinion as fact.
The
practitioner shall communicate the factors critical to the client’s
understanding of the recommendations. These factors may include but are limited
to the material:
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Personal and economic assumptions; |
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Interdependence of recommendations; |
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Advantages and disadvantages; |
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Risks; and/or; |
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Time sensitivity |
The practitioner should indicate that even though
the recommendation may achieve the client’s goals, needs and priorities,
changes in personal or economic conditions could alter the intended outcome.
Changes may include, but are not limited to: legislative, family status,
career, investment performance and/or health.
If there are any conflicts of interest that have
not been previously disclosed, such conflicts and how they may impact the
recommendations should be addressed at this time.
Presenting recommendations provides the
practitioner an opportunity to further asses whether the recommendations meets
client expectations, whether the client is willing to act on the
recommendations, and whether modifications are necessary.
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A Financial Planning practitioner and the client
shall mutually agree on the implementation responsibilities consistent with the
scope of the engagement.
The client is responsible for accepting or rejecting recommendations and for
retaining and/or delegating implementation responsibilities. The Financial
Planning practitioner and the client shall mutually agree on the services. If
any, to be provided by the practitioner. The scope for engagement, as
originally defined, may need to be modified.
The practitioner’s responsibilities may include,
but are not limited to, the following:
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Identifying activities necessary for implementation; |
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Determining division of activities between the practitioner and the client; |
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Referring to other professionals; |
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Coordinating with other professionals; |
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Sharing of information as authorized; and |
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Selecting and securing products and/or services. |
If there are conflicts of interest, sources of
compensation or material relationships with other professionals or advisors
that have not been previously disclosed, such conflicts, sources or
relationships must be disclosed at this time.
When referring the client to other professionals
or advisors, the Financial Planning practitioners shall indicate the basis for
the referral.
If the practitioner is engaged by the client to
provide only implementation activities, the scope of engagement shall be
mutually defined, in accordance with Practice Guideline 100-1. The scope may
include such matters as the extent to which the practitioner will rely on
information, analysis or recommendations provided by others.
This Practice Guideline shall not be considered
alone, but in conjunction with all other Practice Guidelines.
A financial practitioner shall offer appropriate
products and services that are consistent with the client’s goals, needs and
priorities.
A Financial Planning practitioner will use professional judgment in selecting
the products and services that are in the client’s interest. Professional
judgment incorporates both qualitative and quantitative information. A
Financial Planning practitioner shall reasonably investigate and evaluate
products or services that address the client’s needs. The Financial Planning
practitioner shall have a reasonable basis for believing that the products or
services selected are suitable for the client.
Products and services selected by the practitioner
may differ from those selected by other practitioners or advisors. Alternative
products or services may be suitable for the client and could reasonably
achieve the client’s goals, needs and priorities. It illustrates the subjective
nature of exercising professional judgment.
The practitioner must take all disclosures
required to comply with the applicable regulations.
This Practice Guideline shall not be considered
alone, but in conjunction with all other Practice Guidelines.
denotes a person, persons, or entity who engages a practitioner and for whom
professional services are rendered. For purposes of this definition, a
practitioner is engaged when an individual, based upon the relevant facts and
circumstances, reasonably relies upon information or service provided by that
practitioner. Where the services of the practitioner are provided to an entity
(corporation, trust, partnership, estate, etc.), the client is the entity
through its legally authorized representative.
or
denotes the process of determining whether and how an individual can meet life
goals through the proper management of financial resources.
or
denotes the process which typically includes, but is not limited to, the six
elements of establishing and defining the client-planner relationship,
gathering client data including goals, analyzing and evaluating the client’s
financial status, developing and presenting Financial Planning recommendations
and/or alternatives, implementing the Financial Planning recommendations and
monitoring the Financial Planning recommendations.
or
denotes the basic subject fields covered in the Financial Planning process
which typically include, but are not limited to , financial statement
preparation and analysis (including cash flow analysis/planning and budgeting),
investment planning (including portfolio design, i.e., asset allocation, and
portfolio management), income tax planning, education planning, risk
management, retirement planning, and estate planning.
or
denotes a person who is capable and qualified to offer objective, integrated,
and comprehensive financial advice to or for the benefit of individuals to help
them achieve their financial objectives. A Financial Planning professional must
have the ability to provide Financial Planning services to clients, using the
Financial Planning process covering the basic Financial Planning subjects.
or
denotes a person who is capable and qualified to offer objective, integrated,
and comprehensive financial advice to or for the benefit of clients to help
them achieve their financial objectives and who engages in Financial Planning
using the Financial Planning process in working with clients.
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