The Six Ethical Principles

The CFP Board's Code of Ethics contains six principles that define the ethical ideals CFP professionals must embody. While the Standards of Conduct provide enforceable rules, these six principles are aspirational—they represent the highest standards of professional behavior and provide guidance for ethical decision-making in situations not explicitly covered by specific rules.

Understanding each principle deeply is essential for the CFP exam. Questions often present scenarios where you must apply these principles to determine the appropriate professional response.

Principle 1: Integrity

"Act with honesty, integrity, competence, and diligence."

Integrity is the foundation of the CFP professional's relationship with clients. It demands honesty and candor that cannot be subordinated to personal gain or advantage.

CFP professionals are placed in positions of trust by clients. The source of that trust is the certificant's personal integrity. While allowance can be made for innocent error and legitimate differences of opinion, integrity cannot coexist with deceit or subordination of principle.

Practical Application:

• Always tell clients the truth, even when the truth is uncomfortable
• Disclose all material facts that could affect a client's decision
• Never misrepresent your qualifications, experience, or capabilities
• Acknowledge mistakes promptly and work to correct them

Exam Tip: When exam questions present scenarios involving honesty vs. personal gain, always choose honesty. A CFP professional's integrity is non-negotiable.

Principle 2: Objectivity

"Act in the client's best interests."

Objectivity requires intellectual honesty and impartiality. CFP professionals must protect the integrity of their work, maintain objectivity, and avoid subordination of their judgment to others' opinions or pressures.

Objectivity means making recommendations based solely on what is best for the client—not what generates the highest commission, satisfies the employer, or benefits the CFP professional personally. The duty of loyalty (acting in the client's best interests) is embedded in this principle.

Practical Application:

• Recommend products based on client needs, not compensation
• Avoid letting personal relationships affect professional judgment
• Consider all reasonable alternatives before making recommendations
• Document the basis for recommendations objectively

Principle 3: Competence

"Exercise due care."

Competence means attaining and maintaining an adequate level of knowledge and skill, and applying that knowledge and skill effectively when providing services to clients.

CFP professionals must recognize the limitations of their knowledge. When a situation exceeds their competence, they should consult with other professionals or refer the client to a specialist. The competence principle requires knowing what you don't know.

Practical Application:

• Complete the required 30 hours of continuing education every two years
• Refer clients to specialists (CPAs, attorneys) when appropriate
• Stay current on regulatory changes and new financial products
• Practice what you know; refer what you don't know

Exam Tip: "Practice what you know, refer what you don't know" is a key concept. The CFP exam tests whether you understand that competence includes knowing your limitations.

Principle 4: Fairness

"Avoid or disclose and manage conflicts of interest."

Fairness requires impartiality, intellectual honesty, and disclosure of material conflicts of interest. It involves subordinating personal feelings, prejudices, and desires to achieve a proper balance when interests conflict.

Fairness is essentially treating others as you would want to be treated. When conflicts of interest arise, the CFP professional must either avoid the conflict entirely or disclose and manage it appropriately to ensure the client can make an informed decision.

Practical Application:

• Disclose all compensation arrangements that could influence recommendations
• Treat all clients fairly, regardless of asset size or relationship
• Present both advantages and disadvantages of recommendations
• When conflicts exist, always err on the side of disclosure

Principle 5: Confidentiality

"Maintain the confidentiality and protect the privacy of client information."

Confidentiality means ensuring that client information is accessible only to those authorized to have access. A relationship of trust can only be built when clients understand their information will remain confidential.

CFP professionals may use client information for legitimate business purposes or when required by law, but otherwise must maintain strict confidentiality.

Exceptions to Confidentiality (When Disclosure Is Permitted):

Practical Application:

• Protect physical and electronic client records
• Provide a written privacy notice to clients
• Obtain authorization before sharing client information with third parties
• Maintain confidentiality even after the client relationship ends

Principle 6: Professionalism

"Act in a manner that reflects positively on the financial planning profession and CFP certification."

Professionalism requires behaving with dignity and courtesy to clients, fellow professionals, and others in business-related activities. It encompasses proper use of the CFP marks and conduct that enhances the profession's reputation.

The CFP marks carry significant value and must be used correctly. Misuse of the marks or conduct that damages the profession's reputation can result in disciplinary action.

Proper CFP Mark Usage:

• Write: Your Name, CFP® (always include the registration mark)
• Write: CERTIFIED FINANCIAL PLANNER™ professional (ALL CAPS with trademark)
• Follow with approved nouns: professional, certificant, practitioner, certification, mark, or exam
• Do NOT use in email addresses (john@cfp-advisor.com is prohibited)
• Do NOT use in website URLs (www.cfpjohnsmith.com is prohibited)

Practical Application:

• Behave professionally in all client interactions
• Treat fellow professionals with respect
• Use the CFP marks correctly in all communications
• Avoid conduct that could reflect negatively on the profession

Applying the Six Principles: Decision Framework

When facing ethical dilemmas, apply this framework:

If the answer to any of these questions is "no," the action likely violates one or more ethical principles and should be reconsidered.

Comparison: Six Principles at a Glance