CFP Board's Code of Ethics and Standards of Conduct

Every CFP exam tests your understanding of ethics heavily—expect multiple questions on the Code of Ethics and Standards of Conduct. The CFP Board revised its standards effective October 1, 2019, consolidating previous rules into a streamlined framework that emphasizes the fiduciary duty as the cornerstone of professional conduct.

The Structure of Professional Standards

CFP Board's professional standards are organized into three distinct areas:

The Code of Ethics establishes the ethical foundation for CFP certification. These six principles are aspirational—they describe the ideals CFP professionals strive to uphold in all professional activities. The Standards of Conduct, by contrast, contain enforceable duties with specific requirements that CFP Board can investigate and sanction.

The Six Ethical Principles

The Code of Ethics requires CFP professionals to:

1. Act with honesty, integrity, competence, and diligence
2. Act in the client's best interests
3. Exercise due care
4. Avoid or disclose and manage conflicts of interest
5. Maintain the confidentiality and protect the privacy of client information
6. Act in a manner that reflects positively on the financial planning profession and CFP certification

Exam Tip: CFP professionals must follow both the letter and spirit of the Code. The exam tests not just whether you know the rules, but whether you understand their underlying intent.

Standards of Conduct: The Six Duty Categories

The Standards of Conduct expand on the ethical principles by establishing specific duties organized into six categories:

The Fiduciary Duty: Cornerstone of the Standards

A.1 Fiduciary Duty represents the most significant aspect of the CFP Standards. When providing Financial Advice to a client, a CFP professional must act as a fiduciary, which means:

• Duty of Loyalty: Place the client's interests above your own
• Duty of Care: Act with the care, skill, prudence, and diligence that a prudent professional would exercise
• Duty to Follow Client Instructions: Follow reasonable and lawful instructions from the client

The fiduciary duty applies whenever a CFP professional provides Financial Advice, regardless of whether a formal financial planning engagement exists.

When Does Fiduciary Duty Apply?

Understanding when fiduciary duty applies is critical for the exam:

Financial Advice is defined as a communication that, based on its content, context, and presentation, would reasonably be viewed as a recommendation that the client take or refrain from taking a particular course of action with respect to financial matters.

Material Conflicts of Interest

A CFP professional must disclose material conflicts of interest and obtain the client's informed consent before proceeding. A conflict of interest is "material" if a reasonable client would consider it important when making a decision.

Common Material Conflicts Include:

• Compensation arrangements (commissions, fees, revenue sharing)
• Limited product offerings (proprietary products, limited fund families)
• Referral arrangements (payments for client referrals)
• Personal financial interests (owning securities you recommend)

The CFP professional must either avoid the conflict or disclose and manage it appropriately. Disclosure alone is insufficient—the conflict must also be managed to ensure recommendations remain in the client's best interest.

Professional Conduct Requirements

The Standards require CFP professionals to maintain professional conduct at all times:

Use of CFP Marks:

• Use marks appropriately: "Your Name, CFP®" or "CERTIFIED FINANCIAL PLANNER™ professional"
• CERTIFIED FINANCIAL PLANNER must be in ALL CAPS
• Follow with one of six approved nouns: professional, certificant, practitioner, certification, mark, or exam
• Do NOT use marks as part of email addresses or website URLs

Professionalism in Practice:

• Behave with dignity and courtesy to clients, fellow professionals, and others
• Maintain objectivity and intellectual honesty
• Subordinate personal prejudices and feelings when serving clients

Key Terminology

Client: A person to whom the CFP professional provides or agrees to provide Professional Services (Financial Advice or Financial Planning).

Financial Planning: A collaborative process that helps maximize a Client's potential for meeting life goals through Financial Advice that integrates relevant elements of the Client's personal and financial circumstances.

Professional Services: Financial Advice or Financial Planning provided by a CFP professional.

Exam Tip: A client is "engaged" when they first rely on the CFP professional's advice—not when a contract is signed or payment is made. This is a frequently tested concept.

Continuing Education: Maintaining Competence

The Code requires CFP professionals to maintain competence through continuing education:

• 30 hours of CE every two years
• 2 hours must be CFP Board-approved Ethics CE
• Practice what you know; refer what you don't know
• Recognize the limitations of your knowledge

The Prohibition on Circumvention

Section F contains a critical rule: A CFP professional may not do indirectly, or through another person or entity, any act that the Code and Standards prohibit doing directly. This prevents CFP professionals from using employees, firms, or third parties to accomplish what they cannot do themselves.