As a CFP® Professional why do I need to know if I am providing financial advice?
One of the first things that is covered in the Ethics CE course for CFP® Professionals is the definition of "financial advice". This is important for CFP® professionals because we are held to the fiduciary standard of always putting the client's needs first and above our needs or our firm's needs. And this applies whenever we are giving financial advice and/or providing financial planning.
Financial advice is 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 1) the development or implementation of a financial plan; 2) the value or advisability of investing in, purchasing, holding, gifting, or selling financial assets; 3) investment policies or strategies, portfolio composition, the management of financial assets, or other financial matters; 4) the selection and retention of other persons to provide financial services to the client; or 5) exercising discretionary authority over the financial assets of a client.
As you can see, the definition of financial advice is quite broad and encompasses pretty much anything we would ever talk to a client about. To help further clarify things, here is what financial advice is NOT: 1) A communication that, based on its content, context, and presentation, would not reasonably be viewed as a recommendation; 2) responses to directed orders; and 3) marketing materials, general financial educations and general financial communications if a reasonable CFP® professional would not view it as financial advice.
The more specific a communication is to a client's or prospective client's situation, the more likely it will be financial advice. So what's the safe play? Be a financial planner at all times and hold yourself tot he fiduciary standard with all clients and prospective clients. It takes a lot of work to earn the right to put CFP® after your name, so why not fully embrace it and act as a fiduciary even when you aren't required to be.
The CFP® marks are the gold standard in our profession because we have high standards. I encourage you to always live up to them and perhaps one day I'll see you in a CFP® Ethics CE class!
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