Responsibilities when Recommending, Engaging, and Working with Additional Persons and when Selecting, Using, and Recommending Technology

CFP Board’s new Code of Ethics and Standards of Conduct (“Code and Standards”), which takes effect on October 1, 2019, sets forth a new standard for when a CFP^® professional recommends, engages, and works with additional persons, as well as a new standard for duties when selecting, using and recommending technology.

Recommending, Engaging, and Working with Additional Persons

The new standard for when a CFP^® professional recommends, engages, and works with additional persons creates different obligations depending on whether the CFP^® professional is engaging or recommending the selection or retention of another financial or Professional Services provider or is already working with another financial or Professional Services provider.

As set out in Standard A.13, when the CFP^® professional is engaging or recommending the selection or retention of another financial or Professional Services provider, the CFP^® professional must:

• Have a reasonable basis for the recommendation or Engagement based on the person’s reputation, experience and qualifications;
• Disclose to the Client, at the time of the recommendation or prior to the Engagement, any arrangement by which someone who is not the Client will compensate or provide some other material economic benefit to the CFP^® professional, the CFP^® Professional’s Firm, or a Related Party for the recommendation or Engagement; and
• When engaging a person to provide services for a Client, exercise reasonable care to protect the Client’s interests.

When working with another financial or Professional Services provider on behalf of the Client, the CFP^® professional must:

• Communicate with the other provider about the scope of their respective services and the allocation of responsibility between them; and
• Inform the Client in a timely manner if the CFP^® professional has a reasonable belief that the other provider’s services were not performed in accordance with the scope of services to be provided and the allocation of responsibilities.

Selecting, Using and Recommending Technology

In view of the growing use of technology, including digital advice tools, in the financial planning profession, the new Code and Standards in Standard A.14 includes a new, principles-based standard setting forth duties when selecting, using, and recommending technology. The duties are as follows:

• A CFP^® professional must exercise reasonable care and judgment when selecting, using, or recommending any software, digital advice tool, or other technology while providing Professional Services to a Client.
• A CFP^® professional must have a reasonable level of understanding of the assumptions and outcomes of the technology employed.
• A CFP^® professional must have a reasonable basis for believing that the technology produces reliable, objective, and appropriate outcomes.

Approval of the technology by a CFP^® Professional’s Firm is a factor that CFP Board will consider in determining the reasonableness of a CFP^® professional’s care when using technology.