This question appeared on a previous CFP Board examination and the Board’s explanation of the correct answer appears below. The Board indicates that the question was intended to address the CFP applicant’s understanding of “Job Task Domain 6 – Communicating the Recommendation.” The Board indicates that you can expect to see 9% of Board Exam questions on this Domain.
Turning to the question, Option D is the correct answer. The CFP® professional cannot discuss sensitive information with another family member unless he/she has prior permission. He can fire the client, document lack of follow-through, and counsel the client, so Option D is the most acceptable answer.
This is an example of the type of situation a CFP® professional has likely encountered in post-recession America. The clients (John and Barbara) are living above their means. This question requires the candidate to synthesize client spending, ethical principles, practice standards and communication skills to identify which answer is simply not acceptable.
Answer Option A is certainly acceptable. The planner could terminate the relationship with the client. In the 100-1 series Practice Standard, a CFP® professional must define client and advisor responsibilities. By continuing to live above their means, the clients may be presenting a situation where the planner and client cannot meet obligations to one another (such as funding goals).
Options B and C are both possible outcomes a financial planner should take if he/she is going to continue a relationship with the client. While Option B is not an optimal solution to the client’s immediate problems, the process of documentation may lead to further discussion. Option B requires an understanding of the 400 series Practice Standards; overspending must be documented as a limitation when presenting the client with primary and alternative recommendations. If the clients continue to overspend, they will require flexibility in savings products. Option C holds to the ethical principles of competence and objectivity; the CFP® professional would need to address the client’s goal of managing debt by developing a debt management plan.
Option D – the correct answer choice – violates the ethical principle of confidence. A CFP® professional may not disclose client information (in this case, spending habits, debt and behavior) directly to an adult child without legal compulsion or the client’s direct involvement.
