Financial Planning Ethicshttp://www.fool.com/personal-finance/general/2006/11/27/financial-planning-ethics.aspx Dan Caplinger (TMF Galagan)
November 27, 2006
As a consumer, you want the professionals you work with to treat you fairly and honestly. Unfortunately, that's not always what happens. Even ethically-minded professionals face demands on their business lives that often don't allow them to focus enough attention on ethical issues.
When dealing with a financial professional, it's important for you to hold the professional to a high ethical standard. In an attempt to distinguish itself and its professionals, the Certified Financial Planner Board of Standards has established a code of ethics for certified planners to follow. Because many companies that provide financial services, including Ameriprise (NYSE: AMP ) and Principal Financial (NYSE: PFG ) , employ financial planners certified by the CFP Board, knowing the rules that govern them can give you valuable information about what to expect. In addition, even if you work with other financial professionals, you can apply these rules to decide what standards you want your professional to follow.
Code of ethics
Financial professionals who seek the CFP Board's certifications are bound by this code of ethics. That's why attorneys and other advisors often recommend that clients look for board-certified financial planners.
Applying ethical principles
The CFP Board's rules all relate to particular principles in its code of ethics. For instance, in defining the duty of integrity, the rules require planners to avoid misleading ways of soliciting business, fraudulent conduct, and mishandling of client's funds. To be objective, a planner must always act in the best interests of the client, using reasonable and prudent judgment in making any decisions. To remain competent, a planner must take continuing education classes and avoid giving advice in areas in which the planner lacks sufficient knowledge. In order to demonstrate fair treatment, planners must disclose specific information about conflicts of interest, including compensation from outside sources such as mutual fund, insurance, and brokerage companies. They must charge only a reasonable fee, and avoid engaging in client-planner personal business transactions that don't treat the client fairly.
Maintaining professionalism requires planners to act respectfully toward competing professionals, follow all applicable rules and regulations imposed by other organizations or government entities, and in some cases, alert appropriate officials about misconduct by other planners. Providing diligent service means defining the scope of the services the planner will provide, then taking the necessary steps to develop and implement suitable recommendations that meet the client's needs.