Question

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Answer 1

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

The CFP Board includes seven basic principles in its code of ethics. These principles define your rights and the way you should expect a financial professional to treat you. In the view of the CFP Board:

You have a right to a planner with integrity, one who earns your trust and treats you honestly.

A planner's advice should be objective and focused solely on your needs.

Your planner should be competent and well-educated about the financial planning profession, with a continuing commitment to stay informed about new developments in the financial industry.

You should be treated fairly, and your planner should tell you clearly how your professional relationship will work, how the planner will be compensated, and any potential conflicts of interest that may exist.

Your planner should keep any personal information you provide confidential.

The planner you work with should have any required licenses or credentials necessary to do the work you ask the planner to do.

Finally, planners should be diligent in performing any work they agree to do, not only in developing a financial plan for you, but also in helping you to implement it.

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

Although broad ethical principles give clients some degree of comfort, the application of those principles to specific situations can be somewhat vague. In order to clarify the application of its code of ethics, the CFP Board has included a set of rules more specifically discussing common issues that arise during financial planning.