CFP Ethics

The single word behind CFP ethics is trust. Certified financial planners, after all, are asking clients to trust them with the future. That's a heavy burden. It is, as the profession's code says in so many words, "responsibility to the public, to clients, to colleagues, and to employers." Seven principles-- integrity, objectivity, competence, fairness, confidentiality, professionalism, and diligence--and 36 rules spell this out clearly.

After all, the entire insurance industry, not just financial planning, is built on trust. Its mission--developed in the ashes of the Great Fire of London of 1666--is to protect individuals and organizations from devastating loss. Everything revolves around that idea. The code of CFP ethics and professional responsibility encapsulates it very neatly.

As a member of the profession, you'll be reminded of this in each round of the continuing education you're required to take to renew your license as an accredited financial planner. Two of every 15 hours must be taken in professional ethics. It's the industry's way of ensuring competence not only in financial planning but in fulfilling that responsibility to the public.

CFP Ethics in a Nutshell

Pause for a moment and think about the number of investment scams that come to light from time to time. If you're familiar with the classic 1940s movie It's a Wonderful Life, you'll recognize one scene as a good example of the need for the rules of CFP ethics. Mr. Potter refuses to grant George Bailey a loan based on a personal life insurance policy. George asks for the loan in order to cover an accidental loss of $8,000. Though George doesn't know it, Mr. Potter has the envelope containing the $8,000. Potter wants control of the real estate George will lose if he cannot cover the loss. To prevent scams like this from happening everyday, CFP ethics are a very important part of any financial planner's responsibilities.